With the retail price of gasoline and diesel fuel currently around $3 per gallon, some politicians are calling for a suspension or repeal of the 18.4 cents-per-gallon 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) thinks suspending the federal gas tax is a really bad idea, and to make its argument offers these 10 reasons:
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 whole federal motor fuels 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. What’s more, 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 threaten the solvency of the Highway Trust Fund. The recently-enacted highway and transit bill, SAFETEA-LU, utilizes all available revenues projected to be collected for the Highway Trust Fund through September 2009. Right now, the trust fund balance stands at less than $10 billion. The U.S. Treasury Department predicts the trust fund could run out of money before the end of FY 2009 even with current revenues. Without the collection of highway user fees, spending for highway and transit programs would have to be cut or supported from the general fund, thus increasing the federal deficit.
6. Cutting federal investments in highway and transit improvements would 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 U.S. each year.
7. Cutting federal investments in highway and transit improvements would affect traffic safety. Nearly 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.
8. 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 October 1, 1993.
9. 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?
10. Using the gas tax as a political expediency would be bad public policy and set a dangerous precedent.