Gasoline prices are displayed at a Chevron station in Sacramento, Calif., on Oct. 30, 2017. | Rich Pedroncelli, File/AP Photo
For almost a century, one principle has governed Washington’s approach to transportation funding: The people who drive on roads should pay for them.
But that tenet has been withering for nearly 30 years. And the huge infrastructure packages emerging from Congress and the Biden White House are poised to strangle it.
The reason is simple math: The gasoline tax that bankrolls the federal Highway Trust Fund is politically untouchable, leading lawmakers and presidents of both parties to balk at raising it since 1993. But the money to pay for the nation’s growing needs for roads, bridges and transit has to come from somewhere — and the main answer has been to borrow it, adding it onto the yawning federal deficit.
“We’re seeing all kinds of other sorts of pay-fors to continue to grow the size of the program without having the actual users having to pay for it,” said Robert Poole, director of transportation policy at the Reason Foundation. “That sets a bad example.”
The trend alarms traditional road advocates, as well as businesses that rely on highways to keep commerce flowing. They consider the gasoline tax a user fee and say keeping alive the "user pays" principle is crucial to ensuring these large, typically multi-year investments aren't subject to the whims of Congress and its appropriations process, which politics can sometimes grind to a halt. It also keeps money dedicated to infrastructure, relatively insulated from being diverted for other priorities.
The House’s surface transportation bill, which is expected to pass the lower chamber on Thursday, would shore up the Highway Trust Fund with a one-time transfer of $148 billion from the U.S. Treasury. That would nearly double the $140 billion in deficit-financed general revenue that Congress has shoveled into the fund since 2008.
Similarly, the idea of charging motorists or other users for the roads they drive on is nowhere to be found in the $1 trillion bipartisan infrastructure compromise that lawmakers and the White House endorsed last week — or in the multitrillion-dollar proposals that Democrats might try to pass on party-line votes. Instead, the White House and lawmakers have proposed various alternative funding schemes, such as revenue from auction of wireless spectrum, that would probably reap only a fraction of the required cash with a one-time infusion.
“The user fee works because it’s sustainable,” said Ed Mortimer, vice president of transportation and infrastructure at the U.S. Chamber of Commerce.
Some supporters of raising the gas tax, or supplementing it with new fees for vehicle owners, also call it irresponsible to keep paying for highways with the equivalent of the federal government’s credit card.
But some key lawmakers are OK with seeing the concept fade away.
“I'm perfectly fine with borrowing money to make investments in bridges that are going to last 100 years,” House Transportation Chair Peter DeFazio (D-Ore.) told reporters Tuesday. He said investment in infrastructure “makes the country more efficient“ and “has an incredible rate of return.”
Sen. Brian Schatz (D-Hawaii), who has been pushing for a big, broad infrastructure package, agrees.
“We should deficit finance infrastructure spending,” he tweeted. “And characterizing paying in cash for physical infrastructure as some sort of adult, responsible position turns public finance and logic on its head.”
“These are assets that will last decades, so should be paid over decades,” Schatz added.
The gas tax's last big hurrah
Hiking the gasoline tax — long calcified at 18.4 cents a gallon — wasn’t always such a political third rail. As recently as the 1992 presidential campaign, populist Texas billionaire Ross Perot included a five-year, 50-cent hike in the gas tax in his pledge to take on the federal deficit.
The following year, then-President Bill Clinton and the then-Democratic Congress hiked the tax by 4.3 cents a gallon in their deficit-reduction plan, helping fuel a revolt by voters that swept Republicans into command of the Capitol in the 1994 midterms.
Every subsequent president, including Barack Obama and Donald Trump, rejected the idea of increasing the tax again. President Joe Biden has dismissed it, too, saying he wouldn’t support any tax or fee that hits Americans making less than $400,000 a year.
The tax also isn’t indexed to inflation, so 28 years of rising costs have eaten away at its purchasing power. Had Congress indexed it in 1993, the gas tax would now be more than 30 cents a gallon, according to Congressional Budget Office projections.
“We’d be in such a better place right now,” said Jim Tymon, executive director of the American Association of State Highway and Transportation Officials.
Another cause of the Highway Trust Fund’s erosion could be termed the Prius/Tesla Factor: Increasingly fuel-efficient cars and trucks use a lot less gasoline than vehicles did in the early 1990s, and electric cars don’t use any at all.
Add in the tripling of highway construction costs in the past 28 years, and AASHTO estimates that the purchasing power of the gas tax has fallen 43 percent since 1993. By 2030, the Highway Trust Fund is projected to have a shortfall of $189 billion.
Leaders of both parties show no appetite to reverse that trend — and in fact, as spending continues to grow and what the gas tax can pay for continues to erode, the amount of deficit spending Congress allocates to keep it going is accelerating.
The bipartisan infrastructure proposal between 21 senators and the White House briefly raised the prospect of that opposition softening, as a handful of senators negotiating that bipartisan compromise included indexing the gas tax to inflation as a possible way of paying for it. But the White House immediately dismissed it.
Paid for by smoke and mirrors
Instead, lawmakers and the administration have offered a hodgepodge of suggested pay-fors — funding sources that are largely either illusory, impractical or not ready for prime time.
One idea backed by many Republicans: imposing an annual fee on electric vehicles that would be roughly equivalent to how much drivers with gasoline-powered vehicles would pay in fuel taxes.
Democrats scoff, noting that electric cars and trucks account for no more than 2 percent of vehicles on the road. In addition, such a fee would only raise an estimated $1.1 billion over five years, the Congressional Budget Office has estimated.
As electric vehicle adoption becomes more widespread, that amount such a fee raises would grow, but still not enough to make a dent in the massive infrastructure price tags anytime soon. Beyond that, though, Democrats are more interested in offering incentives for electric vehicles use than taxing them.
The result is that Democrats are unwilling to embrace any new transportation user fee, at least for now.
But advocates of user-pays say they’re not willing to abandon the idea.
“A lot of us in the transportation stakeholder community are not ready to give up on the user fee principle that has, really, funded these programs since the 1950s,” AASHTO’s Tymon said.
The Chamber’s Mortimer agreed. “We built the highway system with user fees,” he said.
Even DeFazio acknowledged that the principle will persist for the time being — at least in the form of a weakened gas tax with dwindling purchase power.
For now, “we need to continue the current structure“ of users paying for transportation, DeFazio said. “But we have to supplement it with a good deal of money to get to the numbers we're talking about.”
Replacing the gas tax?
Meanwhile, transportation policy experts have proffered ideas for replacing the gas tax with a new version of making the user pay. One proposal, with fans all over Congress, would charge all motorists a fee based on the number of miles they drive, not how much fuel they burn.
Such a fee, known as vehicle-miles traveled or VMT, would charge gas-guzzlers and Teslas equally for the wear and tear they put on the roads. But the idea raises a host of politically fraught privacy and logistical concerns, making it far from ready for widespread implementation.
Even so, the VMT concept has persuaded some prominent supporters of a gas-tax increase to stop trying. Most notable is Rep. Earl Blumenauer (D-Ore.), who after years of relentless advocacy for a tax hike declared it’s time to abolish the gasoline levy altogether.
“There are two other reasons not to go down that path” of hiking the tax, Blumenauer told POLITICO. “We have had arguments around the gas tax that end up sidetracking the whole process ... The other problem we've got is that the gas tax, increasingly, doesn't work.“
The House Transportation Committee’s top Republican, Sam Graves of Missouri, also favors a switch to VMT — and wants to see the user-pays system preserved.
“What we have to concentrate on is what the core of this bill is and that’s the Highway Trust Fund,” Graves told Fox Business last week, speaking about the surface transportation bill. “We’ve always depended on user fees to be able to pay for that.”
Some policy advocates suspect that the demise of user-pays is still a ways off, even if the principle is out of vogue in today’s Washington.
Infrastructure lobbyist Rich Gold of the firm Holland & Knight said it’s not surprising to see lawmakers pushing to pay for transportation projects without tax or fee hikes, saying that “we’re still in a period where fiscal discipline is being sacrificed at the altar of economic equity and recovery.“ But he said he expects user fees to continue, likely with an “equitably fashioned VMT down the road.”
For others, the answer is for Congress to redefine the notion of who ought to pay.
Pete Rahn, a former transportation secretary of three states and an AASHTO past president, suggests replacing “user pays” with a concept called “beneficiary pays.” In other words, the myriad of businesses that rely on roads — from coal companies to Amazon — would pay into the system through an 8 percent federal surcharge on all commercial activity occurring on U.S. streets and highways.
“In our modern economy there are many beneficiaries who are not ‘users’ of the national highway system but are definitely dependent on it,” Rahn said.
James Bikales and Sam Mintz contributed to this report.
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