Aii Asks: Did COVID-19 shutdowns help or hurt the Highway Trust Fund?02 Jul 2020
The Highway Trust Fund is funded through a federal excise tax on gasoline and diesel fuel. The fuel tax, along with supporting revenue from road permits, commercial taxes, and interest payments make up the Fund.
The onset of the coronavirus drastically disrupted the normal revenue intake of the Fund, because fewer cars were on the road. With most of the nation’s economy on ice, less driving meant less fuel pumping. At the same time, the fewer cars on the road means less wear and tear. This brings up an important question about how COVID-19 impacted the state of road maintenance and repair in America.
Aii Asks: Did the decreased economic and road activity during COVID-19 help or hurt the Highway Trust Fund?
You answered that it hurt.
Of those polled, 75 percent believe that COVID-19 had a negative impact on the Highway Trust Fund, while 25 percent believe it helped.
There are intuitive reasons to believe either one is the case, or that it was essentially a wash. On the one hand, the economic shutdowns kept people off the roads, so there was drastically less wear and tear taking place on highways, roads, and bridges. On the other hand, that same reduction in driving meant less revenue was collected through the gas tax. Because the gas tax funds the Highway Trust Fund, these months of low revenue could weaken its overall solvency.
Those who believe it is a wash believe that the gas tax is proportionate for wear and tear, and/or that there are no backlogs in maintenance needs. If the roads were in perfect condition and the Highway Trust Fund was only keeping up or looking at future maintenance needs, this view would be correct. Unfortunately, the Fund looks backwards to patch up years of wear and tear. And the gas tax revenue – already not proportionate to wear and tear – is divided into supporting the Highway Account and the Mass Transit Account. The latter is used to support transit infrastructure across the country on metro and subway networks and other infrastructure.
Altogether, this means that the lack of driving during 2020 has done little to help the Highway Trust Fund solvency, other than to add less wear and tear than normal. There are billions of dollars of maintenance needed at this very moment, so the lack of revenue brought the Fund closer to insolvency than it already was; moving up the timeline by several months.
States also fund their transportation infrastructure through gas taxes, levied at the pump alongside the federal tax. The same funding predicament the federal fund is facing is taking place at the state level, with many states will looking at shortfalls, like California, Michigan, and many others.
The coronavirus may have been unforeseeable, but the way we fund our highway system was already in question. This crisis should serve as a catalyst to make our system more efficient, more proportionate, more fair, and recession-proof.