Federal tax policy encouraging the use of ethanol-based motor fuels reduces funds available for the nation’s highway improvement program by about $1.l billion per year, the American Road & Transportation Builders Association (ARTBA) recently told the Senate Finance Committee.

ARTBA called on Congress to redirect 2.5 cents per gallon of the federal tax on gasohol from the General Fund to the Highway Trust Fund’s (HTF) Highway Account as a highway user fee. According to ARTBA, this move would generate about $400 million per year for additional highway and bridge improvements.

The 2.5-cents-per-gallon portion of the tax was instituted as a deficit reduction measure.

A motorist purchasing gasohol (with 10 percent ethanol) pays a 13 cents-per-gallon federal excise, compared with 18.4 cents per gallon that a pure gasoline user pays. Of the 13-cent gasohol excise, 2.5 cents is deposited in the General Fund. The combination of the 2.5 cents-per-gallon General Fund contribution and the 5.4 cents-per-gallon tax incentive for gasohol reduces deposits to the HTF Highway Account by 7.9 cents per gallon, or about $1.1 billion per year.

"You should be aware as the Congress discusses and debates a new federal energy policy in the weeks ahead that some current federal energy and tax policies work against the goals of TEA-21," ARTBA President Pete Ruane said. "We urge you to ensure that federal funding for much-needed transportation improvements is not shortchanged in the pursuit of promoting use of alternative motor fuels."

ARTBA cited the 1999 U.S. Department of Transportation’s (USDOT) Status of the Nation’s Highways, Bridges, and Transit: Conditions and Performance Report, which suggests a $50 billion per-year federal highway program is necessary simply to maintain current system conditions and performance levels from 2004-2009. Consequently, the anticipated federal highway investment of $33 billion in FY 2003 leaves a $17 billion gap between what will be available for transportation improvements and what is necessary. Redirecting 2.5 cents-per-gallon of the gasohol excise to the HTF Highway Account would be a first step toward addressing the funding gap, ARTBA said.

"It is clear that America has a growing transportation infrastructure capacity crisis—not just in the road network, but across all modes," Ruane said. "If we do not meet our transportation network challenges, we will compromise American mobility, air and water quality goals and the U.S. economy."

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