Gasohol Tax Breaks Will Cost Billions in Potential Revenues

Wed April 16, 2003 - National Edition
CEG



Federal tax and energy policies aimed at increasing motorist use of ethanol-blended motor fuels like gasohol are negatively impacting federal and state efforts to improve the nation’s highways and public transportation systems, the American Road & Transportation Builders Association (ARTBA) told a congressional subcommittee recently.

Richard Wagman, first vice chairman of the group, told the Senate Subcommittee on Clean Air, Climate Change and Nuclear Safety, the 5.2 cents-per-gallon tax incentive for ethanol-blended fuel and the current 2.5 cents per gallon of the gasohol excise tax now being deposited into the General Fund rather than the Highway Trust Fund (HTF) will reduce potential user revenue to the HTF by $21.5 billion by 2012.

Wagman, chairman and chief executive officer of G.A. & F. C. Wagman Inc., a highway and bridge construction firm based in York, PA, pointed out $21 billion could build one lane of interstate-grade highway from New York City to San Francisco and back. Federal highway investment will total more than $30 billion this year.

Federal funding for state and local road and bridge improvement programs is financed through the collection of user fees, primarily motor fuel sales excises, paid by motorists and truckers. “A car powered by ethanol-blended gas does the same damage to the road as a car powered by straight gasoline,” Wagman pointed out. “The user fee rate on the sale of gasohol should be the same as the user fee rate on gasoline,” he said. “Otherwise, we are just shortchanging the nation’s road improvement program.”

The proposed federal renewable fuels standard now circulating in Congress, which would mandate that gasohol become available for sale in all states in increasing amounts each year, would further exacerbate the highway funding problem, Wagman said. The new mandate alone would reduce potential trust fund income by more than an additional $1 billion per year by 2012, he said.

ARTBA used U.S. Department of Energy forecasts for future ethanol-related motor fuels use to quantify the effect of current ethanol tax policy and the effect of the proposed renewable fuels standard on Highway Trust Fund collections.

ARTBA, Wagman said, is not opposed to either ethanol use or the proposed renewable fuels standard but wants Congress to understand the negative impact.“These well-intentioned tax and energy initiatives” will have on future revenue to the HTF. “We believe federal ethanol initiatives that support agriculture, energy and environmental objectives should be supported through the General Fund, not at the expense of transportation improvements funded by highway users through the transportation trust fund,” the ARTBA spokesman said.

Wagman noted that the U.S. Department of Transportation’s 2002 report to Congress on the condition, performance and investment requirements of the nation’s surface transportation network shows a $17-billion per year funding shortfall between the level of federal highway investment needed just to maintain existing conditions and the level approved by Congress this year. Wagman suggested the ethanol tax treatment be changed to help address this shortfall.

ARTBA was the only transportation or construction-related association to testify at the Senate hearing, which also included representatives from the Bush Administration, city and state governments, the oil and ethanol industries, environmental interests and the agricultural community.

ARTBA was the first organization to propose redirecting the revenue stream from the 2.5 cents-per-gallon portion of the federal ethanol excise from the General Fund to the Highway Trust Fund. It recommended the action in testimony before the Senate Environment and Public Works Committee and House Ways and Means Committee in 2000 and before the Senate Finance Committee in 2001. ARTBA is seeking ethanol tax reform this year in either an energy bill or in the legislation now in development by Congress to reauthorize the federal highway and transit programs.

The association applauded the Bush Administration and the budget committees of the Senate and House for proposing to redirect the revenue stream from the 2.5-cent portion of the federal gasohol excise that now goes to the General Treasury to the Highway Trust Fund as part of the FY 2004 Budget Resolution being voted on.

Wagman said ARTBA also supported either eliminating the rest of the ethanol tax break or enacting a proposal being developed by the bipartisan leadership of the Senate Finance Committee that would establish a General Fund tax credit for ethanol refiners in lieu of an excise tax incentive.

At the hearing, chaired by Senator George Voinovich, R-OH, the National Corn Growers Association said it agreed with the ARTBA position and would support ethanol tax reform so that the Highway Trust Fund is no longer compromised. The Corn Growers support is considered key to the reform effort because ethanol production is important to farmers, particularly in corn growing states like Iowa, the traditional host of one of the first presidential election state primaries.

For more information, call 202/289-4434 or visit www.artba.org.