It should be no surprise, then, that the Highway Trust Fund is about to go broke. The
This is not a new problem. The failure to raise the tax to keep up with inflation, coupled with the growing fuel efficiency of the nation's vehicle fleet, has whittled away the buying power of the fund over many years. The gasoline tax currently generates about $35 billion a year, but the federal government spends $53 billion on highway and transit projects. Since 2008, Congress has transferred in general fund tax revenue to cover the shortfall. This year, gas tax revenue is coming in even lower than projected.
Congress and the Obama administration have proposed various ways to refill the trust fund. The administration wants to close corporate tax loopholes and use the revenue to expand highway and transit funding for four years. Senate Majority Leader
Congress needs to fix the fund, starting with an increase in the fuel tax. Last week, Republican Sen.
The gas tax faces another long-term problem: Federal law requires automakers to double fuel economy by 2025, and that means less demand for fuel and therefore less gas tax revenue. There have been proposals to scrap the sales tax on fuel and replace it with a tax per barrel of oil or one on the wholesale price of oil. Those ideas are worth exploring, but oil taxes would face a similar problem as the gas tax — namely, that increased fuel economy means less demand for oil and therefore less tax revenue. Also, a tax on oil, as opposed to refined fuel, would undermine the "user fee" system envisioned by the creators of the trust fund.