The Alliance for Innovation and Infrastructure (Aii) released a new report today highlighting the declining revenue into the Highway Trust Fund and the looming insolvency that has cast a decade-long shadow over the Fund. In the report, the fuel tax is identified as insufficient –even if increased–for supporting our roads and bridges going forward.
As Congress considers how to fund the Highway Trust Fund and pay for our roads and bridges, cost recovery is key.
The fuel tax was once a user-fee for all drivers. Reforming the system will mean realigning the user fee with impact so that all of us – traditional vehicles, electric vehicles, and truckers – pay proportionately for our actual use, impact, and costs.
The fuel tax was not designed to withstand an innovative technological landscape of fuel efficiency, electric vehicles, and the whole automotive fleet gaining weight over time.
Aii recommends some form of mileage tax and proposes that all vehicles pay for proportionate impact, meaning a system in which all light and heavy duty vehicles participate that accounts for actual miles driven, weight, and number of tires.
This cannot happen overnight, and will mean a short-term tax increase on fuel, tires, or truckers as well as a fuel-tax-equivalent surcharge on electric vehicles. In the long term, the fuel tax should be scheduled for full retirement so that in five, 10, or 15 years, gasoline and diesel fuels are not taxed to support the Highway Trust Fund at all. During that period, a miles-based tax should be phased in, so that drivers pay for their miles traveled and actual impact.
The report highlights innovation as a key reason the fuel tax cannot sustain the Fund. Miles-based tax systems are better calibrated to capture actual impact and costs borne by drivers. Vehicle Miles Traveled or Road Usage Charging fees are efficiency-neutral and innovation-proof systems, unlike the fuel tax, which is vulnerable to both.
Over the last 30 years, the fuel tax had brought in disproportionately low revenue, not keeping pace with costs due to increased fuel efficiency, vehicle weight gains, electric vehicles paying no tax, truckers paying high but not necessarily proportionate fees, and inflation robbing the purchasing power of the revenue.
Congress must face each of these realities and decide on a revenue plan for both the short term and long term that reasserts the user-pay model, captures costs, treats all drivers fairly, and does not fall victim to innovation.
Find supporting material and additional commentary in our Policy Blog.