US DOT Misreports Gasoline Tax Revenue

by The Newspaper

Published: December 23rd, 2008

Thanks to soaring gasoline prices and the ongoing recession, motorists traveled 100b fewer miles in fiscal 2008. Transportation officials seized upon these facts to argue that the gas tax is unsustainable and that the country must quickly shift to tolling to save the highway trust fund. “As driving decreases and vehicle fuel efficiency continues to improve, the long term viability of the Highway Trust Fund grows weaker,” Transportation Secretary Mary Peters said in a December 12 statement. “The fact that the trend persists even as gas prices are dropping confirms that America’s travel habits are fundamentally changing. The way we finance America’s transportation network must also change to address this new reality, because banking on the gas tax is no longer a sustainable option.” Turns out it was an argument built on sand…

The federal Highway Trust Fund took in $3 billion less in revenue in fiscal 2008 than it did in 2007. Federal Highway Administrator Tom Madison placed the blame squarely on the gas tax.

“This (drop in revenue) underscores the need to change our policy so American infrastructure is less dependent on the amount of gas American drivers consume,” Madison said.

The American Road and Transportation Builders Association (ARTBA) crunched the numbers and found this assertion to be entirely untrue.

In fiscal 2007, the US Treasury reported that a total of $29.4b was collected from the taxes on gasoline and diesel fuel. In 2008, the total figure grew by $185m to $29.6b. Lower traffic volumes did cause gasoline tax revenue to drop $70m, but this figure was more than offset by a $256m increase in revenue from the tax on diesel, which is primarily paid by the commercial trucking industry. View revenue chart.

These truckers, hit by tough economic times, cut expenses significantly. Sales of new rigs plunged in 2008. That caused a $2.4b drop in revenue from the 12 percent tax on the retail sales of trucks and trailers. An accounting change in the way kerosene and similar taxes were transferred ended up showed a paper loss of $722m from the fund. Together these factors, which are unrelated to the number of vehicle miles traveled (VMT) in 2008, accounted for the $3b drop in trust fund revenue.

“The US DOT misused that data to suggest the federal motor fuels tax can no longer finance federal investments in highway and mass transit improvements,” ARTBA Vice President William Buechner said. “The data in fact suggest that the federal motor fuels taxes can remain a viable source of revenues for highway investments for the foreseeable future. The trust fund’s real problem is not the decline in VMT, but rather the economic slowdown and the fact the federal motor fuel tax rates have not been changed since 1993.”

TheNewspaper has previously reported that gas tax revenues have not plunged at the state level. In Virginia, for example, fuel tax revenues were up 2.6 percent in fiscal 2008 ( more). Motor carrier fuel tax receipts likewise increased in Illinois ( more). At the same time, overall traffic has plunged on toll roads forcing huge increases in the tolling rates to prevent a loss in profit for private investors ( more).

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Njgreene on Dec 24, 2008

Higher gas taxes make sense. Phase them in over time, use a chunk of the initial revenue to fund vehicle replacement for low income drivers (based on reverse income tax principles) and build the tax up over 12-24 months incrementally. We've already shown we can survive $4 gas, using taxes to raise the price back to $2.50 wouldn't kill us all.

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Wjo on Dec 24, 2008

This is an interesting thread, full of strong beliefs... I know quite a few people in the transportation world. Some basic facts are: 1) wear on roadways is roughly proportional to miles driven. 2) increasing gas mileage reduces funds available per mile. 3) the gas tax hasn't been adjusted for inflation for years 4) we've been systematically underinvesting in maintenance for years 5) our initial capital investments in roadways has been first-cost instead of lifecycle cost driven (e.g., we don't build up the base layers for durability). So we structurally have a funding problem for the roads....we need to have some way to invest more either through taxes or tolls or something. Or we just let the roads keep deteriorating.

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