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More troubling news for the future of the gas tax in a new study from the Thomas Jefferson Program in Public Policy.

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Coverage from For Construction Pros:

A team from William and Mary’s Thomas Jefferson Program in Public Policy (TJPPP) 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.

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Here’s the opening forward, which summarizes the report’s findings:

Associated Equipment Distributors (AED) is proud of the role it played in helping to enact Moving Ahead for Progress in the 21st Century (MAP- 21), the two-year surface transportation authorization law signed by President Obama in July 2012. The legislation will provide some much- need short-term certainty for state transportation officials and the construction industry. The new law also included significant reforms that have made the highway program more efficient and transparent (e.g., environmental streamlining and program consolidation).

However, with those improvements in place, now it is time to have a public debate about how to create new revenue streams for the Highway Trust Fund (HTF).

As policymakers and transportation advocates are painfully aware, the gas tax and other highway user fee revenues are insufficient to support even current, inadequate investment levels. The revenue shortfall has necessitated tens of billions of dollars in transfers from the General Fund to the HTF in recent years. At the same time, the nation’s transportation network is in desperate need of substantial, additional investment. According to the Texas Transportation Institute, traffic congestion (resulting in large part from inadequate capacity) costs the U.S. economy more than $100 billion per year in wasted fuel and lost productivity.

These issues will be front and center in the 113th Congress. MAP-21 expires on the end of FY 2014 and surface transportation programs must once again be reauthorized. At the same time, Congress and the president are set to embark on a once-in-a-generation tax and budget reform debate. AED has long argued that highway user fees should be increased as part of a broader tax and budget deal.

In late 2012, as part of our ongoing effort to help policymakers better understand the problems they are being asked to solve, AED commissioned an economic research team at the College of William and Mary to examine the HTF’s revenue shortfall (particularly those related to increased fuel efficiency standards and alternative fuels) and explore new ways to fund surface transportation infrastructure investment.

The researchers from W&M’s Thomas Jefferson Program in Public Policy (TJPPP) drew some interesting conclusions. What resonated for me (as someone who has been involved in highway issues for almost two decades) are the long-term consequences of failing to do the right thing when you have the chance. A case in point: The researchers determined that indexing the federal gas tax for inflation in 1993 (the last time it was increased) would have generated an additional $64.4 billion in revenue over the last two decades.

But the W&M report is also a wake-up call for lawmakers today. The TJPPP team projects that higher fuel efficiency standards will further erode the value of the gas tax, and that failing to change the existing tax structure could lead to a $365.50 billion shortfall for the HTF (between current spending and anticipated revenues) over the next 23 years.

Our objective in commissioning this study was to help document the challenges facing the HTF and to encourage creative thinking about how to fund federal infrastructure programs. While we are pleased with the data and ideas our researchers have brought to the table, the conclusions and proposals contained herein are those of the researchers, not AED. As such, this document should not be regarded as a statement of association policy, objectives, or recommendations for highway and transit reauthorization legislation. We merely wish to inform the debate and give lawmakers fresh perspectives on the federal infrastructure crisis and how to solve it.

We thank our researchers – Devin Braun, Ryan Endorf, and Stephen Parker – for their thorough analysis. Thanks also to William and Mary professors Sarah Stafford, Rui Pereira, and Admasu Shiferaw for supervising and coordinating the project.

Finally, this report would not have been possible without the support of equipment distribution companies throughout the United States, who – by belonging to AED – have allowed the association to play a leadership role in the continuing surface transportation debate. We thank them for their involvement in the association, their financial support, and their confidence.

Christian A. Klein
Vice President of Government Affairs & Washington Counsel Associated Equipment Distributors
Washington, D.C.
January 2013

Click here for the full report.