With gas prices reaching $3 per gallon or more as a result of disruptions to the motor fuel supply chain, some are calling for a suspension or repeal of the 18.4 cents-per-gal. federal tax on motor fuel sales. Since 1956, this excise has served as a user fee to generate dedicated revenue for the Highway Trust Fund, the source of federal investments in state and local highway and public transit improvement programs.
The American Road & Transportation Builders Association (ARTBA) offers 10 reasons why such a move would be extremely bad public policy:
1. Starving the federal Highway Trust Fund of revenue is not a solution to higher gas prices.
Providing and maintaining transportation infrastructure is a core function of government. It is an essential platform for economic activity and facilitates the provision of virtually all essential public services — fire and emergency response, law enforcement, homeland security and national defense.
2. Suspending the federal gas tax would reduce revenues to the Highway Trust Fund by $2.5 billion per month.
The resulting cut in state and local highway and transit improvement programs would jeopardize 120,000 American jobs.
3. Even if the federal excise were reduced, the federal government could not guarantee that gas prices would drop commensurately at the pump.
In fact, research shows that when the states of Illinois and Indiana temporarily suspended their sales tax on motor fuel purchases in 2001 in response to escalating retail prices:
• the impact on consumer pocketbooks was minimal;
• almost half of the revenues were pocketed by the oil and gas industry; and
• state transportation improvement programs were shortchanged by tens of millions of dollars.
4. Reducing or eliminating the federal motor fuels tax would do nothing to increase the supply of motor fuels — a major reason why motor fuel retail prices are up.
5. Repealing the federal gas tax, even for only a few months, would bankrupt the Highway Trust Fund as early as 2006, leaving nothing to cover outstanding obligations.
The highway and transit bill just passed by Congress and signed into law by President Bush Aug. 10 will utilize all available revenues projected to be collected for the Highway Trust Fund through September 2009. Right now, the trust fund balance stands at $10 billion. Without the collection of highway user fees, these bills would have to be paid using general fund, thus increasing the federal deficit.
6. The federal gas and diesel excises have had nothing to do with the recent dramatic increase in gasoline and diesel fuel prices.
The federal gas tax rate has not changed since Oct. 1, 1993.
7. What would happen when the federal gas tax suspension is lifted?
Would Americans experience — in one day — an 18.4 cent per gallon spike in the retail price of motor fuel?
8. Cutting federal investments in highway and transit improvements will exacerbate traffic congestion across the nation — causing motorists and truckers to spend even more on motor fuel.
Research by the Texas Transportation Institute shows traffic congestion is now responsible for 5.7 billion gallons of wasted motor fuel in the United States each year.
9. Cutting federal investments in highway and transit improvements will affect traffic safety.
Approximately 43,000 Americans died last year in motor vehicle crashes. Poor road conditions and outdated alignments were a factor in an estimated one-third of them. Highway crashes cost American society $230 billion — $820 per person — each year. Traffic accidents are the leading cause of death of Americans 6 to 28 years of age and result in more permanently disabling injuries than any other type of accident.
10. Using the gas tax as a political expediency would be bad public policy and set a dangerous precedent.