USA: new fuel tax could mean increased highway funding

Byrebecca3360

Updated Thu, 26 Jun 2014 10:48:23 GMT

Last week Sen. Bob Corker (R-TN) and Sen. Chris Murphy (D-CT) announced a plan calling for an increase in federal gasoline and diesel taxes to shore up the Highway Trust Fund (HTF) and prevent a potential nation-wide road construction work stoppage.  According to initial reports, the taxes will generate US$164 billion increase in HTF revenues.

Analysis (request a copy) by the Portland Cement Association (PCA), however, reports that the Corker-Murphy proposal would result in nearly US$210 billion additional dollars for investment in the nation’s roads and infrastructure. PCA considered the growth in total vehicle miles travelled (VMT), the composition of travel between diesel users and gasoline users, and fuel efficiency and inflation assumptions.

PCA projects that during a 10-year period, the Corker-Murphy proposal would generate US$209 840 000 for the HTF. It calculated the impact of the gas tax increase, projecting a 2.5% growth in VMT 2014 – 2017 and 0.9% thereafter, and fuel efficiency gains at 1.2% annually.  PCA expected inflation to grow 2% annually throughout the forecast horizon.

“PCA’s estimates tend to agree with estimates from the Joint Committee on Taxation (JCT),” said Ed Sullivan, PCA chief economist and group vice president.  “JCT estimates that a one-cent increase in taxes on motor fuels would raise about US$1.5 billion each year for the trust fund.  A 12-cent increase equates to US$18 billion and compares to PCA’s 2016 estimate of US$18.7 billion.”

According to Sullivan, the difference between JCT estimates and PCA projections is due to assumed increases in VMT between 2014 and 2016.

The Corker-Murphy proposal adheres to funding principles that PCA, through its involvement in the Highway Materials Group, has circulated to lawmakers, including maintaining the integrity of the user-fee based funding mechanism and ensuring long-term stability and solvency of the Highway Trust Fund.