The Highway Trust Fund (HTF) is facing a significant financial shortfall as expenditures continue to outpace revenues, driven primarily by user fees on gasoline and diesel fuels. Notably, the federal gas tax, a key source of HTF revenue, has not been adjusted for inflation since 1993, resulting in a diminished revenue stream. This issue is compounded by the rise of electric vehicles (EVs), which bypass traditional fuel taxes altogether, further straining the HTF.
Addressing the EV Gap with Proposed Legislation
In response to the challenges posed by EVs, legislation has been introduced in Congress to impose a one-time fee on new electric vehicles. The Fair SHARE Act, spearheaded by Rep. Dusty Johnson and Sen. Deb Fischer, proposes a $1,000 fee on new EV sales and a $550 fee on heavy battery modules. These measures aim to compensate for the lost revenue from EVs not paying gas taxes, but they do not adjust for the actual miles driven, which limits their effectiveness in covering road maintenance costs.
Revenue Projections and Uncertainties
Estimates suggest that the Fair SHARE Act could generate approximately $48.75 billion over a decade, factoring in the fees on EVs and a slight shift back to conventional vehicles due to the new costs. However, this revenue would reduce the federal deficit by only $36 billion after accounting for offsets in income and payroll taxes. The actual impact remains uncertain due to factors like technological advancements in EVs and the influence of other policies such as the Inflation Reduction Act and EPA regulations.
The Case for a Vehicle Miles Traveled Tax
Given the projected $270 billion deficit in the Highway Trust Fund by 2034, a more sustainable solution lies in implementing a vehicle miles traveled (VMT) tax. This approach aligns road usage with funding requirements, charging drivers based on the miles they travel. A VMT tax could be structured to account for vehicle weight, ensuring fair contributions to road maintenance across different vehicle types.
While administrative challenges exist, several states have successfully piloted VMT programs, demonstrating their feasibility. A federal VMT system could eliminate issues with interstate road use and provide a consistent funding mechanism. By replacing the gas tax with a VMT tax, it is estimated that $270 billion could be raised over ten years, significantly reducing the federal budget deficit.
As the debate over infrastructure funding continues, the shift towards a VMT tax presents a viable path forward in addressing the Highway Trust Fund’s financial challenges, ensuring that all road users contribute equitably to the nation’s transportation infrastructure.
Original Story at taxfoundation.org