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Study Examines Fuel Efficiency Impact On Gas Tax Receipts


As automobile fuel economy increases, the federal highway program’s fiscal position will become ever more precarious, a new Associated Equipment Distributors (AED)-funded study by researchers at the College of William and Mary finds.

The team from William and Mary’s Thomas Jefferson Program in Public Policy forecasts that over the next 23 years, as Corporate Average Fuel Economy (CAFE) standards rise, gasoline consumption will decline. This will lead to a drop in gas tax payments to the federal Highway Trust Fund (HTF), the highway program’s primary funding source. Failing to change the existing tax structure while maintaining current investment will cause the HTF’s account to incur a $365.5 billion deficit over the next 23 years, the study concludes.

The highway program is already in dire straits. Although it has been self-sustaining for many years thanks to the gas tax and other user fees, declining revenues have made transfers from the general budget necessary to prevent road and bridge spending cuts. Myriad studies have shown that merely maintaining current spending is insufficient to build the infrastructure our growing economy needs.

One report by the Texas Transportation Institute found that traffic congestion, resulting in large part from inadequate capacity, costs the country more than $100 billion per year in wasted time and fuel.

“HTF revenues are inadequate to support today’s road and bridge spending levels, which are already well below what’s needed to maintain the interstate system’s performance,” said AED Vice President of Government Affairs Christian Klein. “As part of the broader tax and budget reform debate, Congress needs to do something bold to put the program back on solid fiscal footing.”

The William and Mary study offers a few possible solutions. The gas tax was last increased – to 18.4 cents per gallon – in 1993. The research team determined that restoring the gas tax’s 1993 spending power by raising it to 25 cents and indexing it for future inflation would raise $167 billion above current baseline spending requirements over the next two decades. The study also examined ways to implement a vehicle mileage-based user fee.

“We hope Congress will take these findings to heart and act quickly to identify new revenue streams for the road program,” AED President and CEO Toby Mack said. “Highways are the arteries of commerce and the arteries are clogged. The longer lawmakers wait to tackle the problem, the worse it’ll get and the harder it’ll be to fix.”