Oberstar points to road problem: a shortage of federal gas-tax revenue

CORBIS/Thom Lang

WASHINGTON — The problem is simple, says Rep. Jim Oberstar, who chairs the House Transportation Committee: There simply isn’t enough money coming in through the federal gas tax right now to meet the nation’s current needs for road and bridge repairs.

And as fuel efficiency increases, drivers will invariably take fewer trips to the gas station and the amount of revenues generated by the gas tax will drastically shrink.

It’s as Transportation Secretary Ray LaHood explained earlier this year:

In the past, the Highway Trust Fund has been largely user-supported through fuel-tax revenue. The idea is that drivers who use the roadways will need to buy gas, and generally how much gas they buy corresponds to how many miles they’ve driven or how much they’ve used our roadways.

However, technology and behavior have changed enough that this approach is no longer sufficient. As we move forward with surface transportation reauthorization, we need lawmakers and experts to think creatively about how we’re going to fund our transportation infrastructure in the 21st century.

The good news is that there are several possible solutions that could bridge the funding gap, including raising the gas tax in the short term and implementing congestion or mileage fees sometime in the next decade.

The bad news: Absolutely none of those ideas seem to have even the remotest chance of passing in the current political climate.

More mileage, more problems
Let’s say that in November, when the Chevy Volt rolls off the production line, I scrounged up the cash, traded in my 122,000-mile-old 2000 Subaru Legacy and actually purchased GM’s new plug-in hybrid.

Currently, my car is rated at 19 mpg city/25 mpg highway, which wasn’t too shabby back then. The Department of Energy estimates that an average driver covers 15,000 miles and spend $1,842 a year in fuel costs, which (at their estimate of $2.58 a gallon) translates to almost 714 gallons of gas a year.

Multiply that by 18.4 cents a gallon for the federal gas tax, and I’m on the hook to Uncle Sam for $132 a year, give or take a few cents. Almost all of that money goes to the Highway Trust Fund, which pays for road and bridge repairs, infrastructure and mass transit projects.

Rep. Jim Oberstar
Rep. Jim Oberstar

Now say I got the Volt, which is powered for its first 40 miles by an electric battery alone and to which the EPA assigned a (somewhat controversial) 230 mpg fuel economy estimate. If I somehow hit that estimate, my contribution to the highway tax fund would shrink to around $12.

And you simply can’t fund a highway system on $12 a year.

That may be a fairly drastic example, but it’s a simple maxim that, all else being equal, better fuel economy means fewer trips to the pump.

Fewer trips to the pump mean less money spent on gas. The less spent on gas, the less paid on the gas tax, currently set at a flat rate of 18.4 cents a gallon (18.3 cents of which goes to the Highway Trust Fund).

And less gas tax money means a reduction in dollars to the Highway Trust Fund, which is used to fund road and bridge repairs to an infrastructure system that has already begun to show its age.

“With more fuel efficient cars or the alternative propellant forces, you need to increase the user fee,” Oberstar said.

Revenues don’t match needs
Gas taxes were originally conceived as a simple substitute for vehicle miles traveled, under the thinking that those who used the roads more would fuel up more and then pay more. By and large, that’s how it has worked so far.

“For 54 years of the interstate highway program, the public has paid its own way,” Oberstar said. “You use the system, you pay for it.”

Because it is not adjusted for inflation, the federal gas tax has experienced a cumulative loss in purchasing power of 33 percent since 1993 — the last time the federal gas tax was increased.

All in all, there remains a $140 billion gap over the next 6 years between expected revenues and what Oberstar said we “actually need” to bring roads and bridges into good repair.

And not only is there not enough money to do all that, there’s not even enough coming in to keep the fund solvent. Because the Highway Trust Fund is designed to be revenue neutral, any shortfall in the fund would just be partially reimbursed for transportation spending until Congress bails out the fund.

Congress has had to bail out the trust fund twice in the past few years.

“People who are buying more fuel efficient cars are fueling up less but still driving and still using the roads,” said Annette Nellen, an expert on taxation and transportation at San Jose State University.

“You would think that because there’s not enough money going in there right now that this would be addressed.”

Minnesota, which received $581 million in federal highway aid in 2009, is equally impacted with all other states here. Say there were $100 billion in requests, but only $50 billion in the fund. States would be reimbursed at 50 cents to the dollar until the fund is bailed out. For states with cash shortages — like Minnesota — that could be a tough wait.

Fuel economy gains speeding crisis
Presently, vehicles are required to average 27.5 miles per gallon. A 2007 law increases that requirement to 35 mpg by 2020, however an April rule by the Obama administration speeds it up to 35.5 mpg by model year 2016.

Much of the gain in fuel economy currently is coming from the rise of gas-electric hybrids and an increasing willingness to by automakers to produce (and drivers to purchase) smaller cars and trucks.

Hybrid vehicles are increasingly more common, boosted by greater fuel efficiency, wider availability and federal tax credits of up to $3,400 per vehicle. Additionally, automakers have begun selling the kind of small, fuel-efficient cars to Americans that were once only available in Europe.

Last year Volkswagen unveiled a North American version of the Golf, the most popular car across the pond (the TDI clean diesel version of which gets 41 highway miles per gallon). Earlier this year, Ford rolled out an American version of the Fiesta, which gets around 38 miles per gallon.

Automakers are also planning to overhaul their fleets to meet the surging demand for more fuel-efficient vehicles — Chrysler for one plans to increase its fleet-wide fuel economy by 2014.

On the horizon: hyper-efficient plug-in hybrid electric vehicles like GM’s Chevrolet Volt and its 230 miles per gallon.

Several suggested solutions, but scant support
Seeing the need to move off the gas tax, Congress commissioned a bipartisan study of future revenue sources during the last surface transportation reauthorization process. That committee reported its findings in early 2009. [PDF]

The headline of the press release accompanying the report was direct. [PDF] “The U.S. Should Shift From the Gas Tax to a Mileage-Based Usage Fee by 2020. The current federal motor fuels tax is unsustainable over the long term.”

“We must start transitioning to a new paradigm now,” said Mike Krusee, a commissioner who also served at the time as a Republican state representative in Texas. “If we don’t start, we will never get there.”

Problem is, none of the possible solutions have anywhere close to the number of votes required to pass in Congress.

That gas tax hike Oberstar is looking for? Scuttled by his own party which doesn’t want to push it without Republicans on board.

A White House spokesman, very succinctly, said that “the White House does not support a gas tax increase.”

Rep. Chris Van Hollen of Maryland, a senior House Democrat who heads the DCCC (the organization tasked with electing more House Democrats), said earlier this year that it “certainly won’t fly this year, because we’re going to have to have some kind of bipartisan consensus before you more forward on any kind of funding mechanism like that.”

When Minnesota raised its gas tax in 2008, lawmakers had to override Gov. Tim Pawlenty’s veto to do it, and Republicans who crossed over suffered for it during the campaign.

The conservative Heritage Foundation suggested another idea — scrap the federal gas tax altogether, get the federal government out of road funding and let the states levy the taxes they need. States would then be free to put in whatever system worked best for them.

Republicans would have to have a sizeable majority to have a chance at passing something like that — and even the best projections from the upcoming elections don’t put them anywhere close to a number that big.

At least one Republican on the House Transportation Committee floated the idea of switching the gas tax from a flat fee to a percentage, similar to state sales taxes, so that revenues would go up as prices go up (and down if they go down).

That plan, which Oberstar said he was willing to consider, was ultimately rejected by GOP leaders for looking too much like a tax increase.

Then there’s the idea of counting vehicle miles traveled, either through regular odometer checks or installing a tracking system on cars to see how far they’ve gone. Such systems have been piloted, but haven’t yet gone widespread.

“It’s not viewed as a burning issue yet, and whenever the discussion comes up about tracking vehicle mileage you have to ask how you’re going to measure that,” Nellen said. “First there’s an issue of privacy, and second, is it that dire of a situation yet? And I think it is.”

“You could also have more tollbooths, but that isn’t highly desirable either.”

Oberstar has not specifically endorsed a vehicle mileage tracking solution, rather his surface transportation bill would establish pilot programs to test potential solutions. The best of those would be folded into the 2015 surface transportation reauthorization.

But that bill may not even come up this year, and if it does a lame duck session is the likeliest time for it.

Nellen said solutions (and the unpopular votes needed to pass them) won’t likely be fully realized until lawmakers realize the looming crisis in transportation funding — and that something needs to be done about it.

“And as far as I can tell, no one’s really paying attention to it.”

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Comments (14)

  1. Submitted by David DeCoux on 06/17/2010 - 09:37 am.

    Here is an idea, take some money from the war machine and use it for roads and infrastructure. The largest single item of discretionary spending in the federal budget is in the defense budget. Estimates vary on what is and what is not defense budget, as do shady gov’t accounting practices, but the amount we spend on defense is likely about one trillion dollars a year.

    Cut Defense spending in half and use that money.

    What does the fuel tax raise in revenue every year? I’ve read 25-30 billion so even using a fraction of the 200-300 billion that we spend in Iraq/Afghanistan would likely foot the bill.

  2. Submitted by myles spicer on 06/17/2010 - 11:16 am.

    And boy, do we need road repair. There are parts and places of our roads that are not only disgraceful, but are deteriorating to the extent that replacement will be needed instead of repair; and that, in the end will be far more costly.

    Additionally, the gas tax (while unfortunately regressive), and be a compenent in getting us away from fossil fuels simply by making them more costly. To quote Obama: “the time is NOW”.

  3. Submitted by rolf westgard on 06/17/2010 - 11:33 am.

    We all love to drive, but we want somebody else to pay for it.

  4. Submitted by Mike Schumann on 06/17/2010 - 12:14 pm.

    What exactly is the problem with the gas tax??? What the country really needs is a $1-2 / gallon gas tax increase so that people will really be motivated to buy efficient vehicles and that it will be cost effective for the auto manufacturers to make the additional investments in their vehicles to dramatically increase mileage.

    A mileage tax is a stupid idea. Who benefits from that???? Garmin who will make the tracking hardware, and another government bureaucracy to collect another tax. Not to mention the whole big brother issue of being able to track your every movement.

  5. Submitted by Ron Gotzman on 06/17/2010 - 12:36 pm.

    Once again…never enough money!

  6. Submitted by Jeff Klein on 06/17/2010 - 12:57 pm.

    A mileage tax is silly because it doesn’t have the extra benefit of encouraging consumers to choose fuel-efficient vehicles. In fact, since a gas guzzling vehicle is more likely to be heavy and do more damage to the roads anyways, it seems that a gas tax is actually MORE directly related to road use.

    I say tax $8 a gallon with tax write-offs to low-income people who need to drive to work.

  7. Submitted by Richard Schulze on 06/17/2010 - 01:16 pm.



  8. Submitted by John Jordan on 06/17/2010 - 01:36 pm.

    Any liberal who doesn’t think they’re paying enough is always able to send in a check. You want to pay $8 a gallon, no one is stopping you. Until you do, it’s all just talk. Anyone with a half a brain knows it would kill the economy. Of course, given most of those clamoring for this want us back with horses and buggies.

  9. Submitted by myles spicer on 06/17/2010 - 03:49 pm.

    High gas prices would kill the economy? Not in virtually every other country where gas prices (generally due to taxes) are far higher than here. We have simply become energy pigs over the decades due to our cheap fuel prices.

  10. Submitted by rolf westgard on 06/18/2010 - 06:24 am.

    Well put Myles. Many of those countries with high gas taxes are eating our lunch in world trade.

  11. Submitted by Francis Ferrell on 06/19/2010 - 03:22 am.

    Stop thinking in the proverbial box. “Fuel” taxes should come from ‘all’ alternative, bio, recycled, and petroleum based fuels. Also, additional monies can be obtained by not subsidizing greener energy fuel sources beyond start-up help.

    Let the free market/capitalistic system do its economic magic. The cost of greener energy fuels etcetera can be produced and their prices be market-driven as well as taxed accordingly. Profits can be reasonably made; prices per gallon can be lower; and, development, engineering, and production expenditures can be environmentally friendly if American know-how is put to the test. That’s the American Way of accomplishing the impossible tasks at hand.

  12. Submitted by kyle marx on 06/21/2010 - 12:19 pm.

    There is no equitable way to tax an owner of an automobile that gets better gas mileage than another vehicle.
    In most states cars have to go through some type of registration and/or smog check annually. Why not just add an entry for the odometer at that time of registration or smog check. Have the document show the last years documented odometer statement and a blank set of fields that can be filled in with the current mileage on the odometer. Then we would add it to our tax form each year the milage that we reported used on ou r annual registration. The goverments would set up a tax per mile that is representative of the vehilcle you drive. All vehicles have VIN numbers that will tell the government how much the car weighs and will be able to figure out how much road wear the car produces. Then tax it. No need for uncle sam electronically tracking us through a Garmin GPS or anything. When the car is sold it will need to have matching odometer readings from the previous registration documents and whatever the difference is, the consumer will pay for what they used.

  13. Submitted by david granneman on 06/21/2010 - 01:51 pm.

    i think that people buying energy efficent electric and hybred cars should pay a 50% road tax because they are not paying THEIR FAIR SHARE of road taxes. it is obvious that the older gas guzzlers are paying more than THEIR FAIR SHARE of the road taxes. it is possible that if the highway trust fund was not used for everything from trains to bike paths there might be enough money to repair the roads. do the people advocating high gas prices realize that all products that we use are dilivered by gas burning vehicles. this means high gas prices would raise the price on almost everything we buy.

  14. Submitted by Mohammed Ali Bin Shah on 06/21/2010 - 04:00 pm.

    If you check my odometer every year, I will just have to connect and reconnect it every year. The invasion of privacy will not stand up in court.

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