William & Mary

New Study Examines Fuel Efficiency Impact on Gas Tax Receipts

Feb. 1, 2013

AED News[This press release highlights the outstanding work by the TJPPP Policy Research Team of Devin Braun, Ryan Endorf, and Stephen Parker.  They were engaged to examine the prospective impact of higher fuel efficiency standards on the federal Highway Trust Fund. The report was presented to Rep. Bill Shuster (the new Chairman of the House Transportation & Infrastructure Committee) on Wednesday and formally released today.  The story was reported by Politico Pro within two hours.]  

WASHINGTON, D.C. - As automobile fuel economy increases, the federal highway program's fiscal position will become ever more precarious, a new study by researchers at the College of William and Mary finds.
Ryan Endorf, Devin Braun and Stephen Parker present their findings to Christian Klein, VP of Government Affairs & Washington Counsel, AED

The team from William and Mary's Thomas Jefferson Program in Public Policy (TJPPP) forecasts that over the next 23 years, as Corporate Average Fuel Economy (CAFE) standards rise, gasoline consumption will decline.  This will lead to a drop in gas tax payments to the federal Highway Trust Fund (HTF), the highway program's primary funding source. Failing to change the existing tax structure while maintaining current investment will cause the HTF's account to incur a $365.5 billion deficit over the next 23 years, the study concludes.

The highway program is already in dire straits.  Although it has been self-sustaining for many years thanks to the gas tax and other user fees, as part of the most recent highway authorization law, Congress was forced to shift money from the general budget to prevent road and bridge spending cuts.  Myriad studies have shown that merely maintaining current spending is insufficient to build the infrastructure our growing economy needs.  One report by the Texas Transportation Institute found that traffic congestion, resulting in large part from inadequate capacity, costs the country more than $100 billion per year in wasted time and fuel.

"HTF revenues are inadequate to support today's road and bridge spending levels, which are already well below what's needed to maintain the interstate system's performance," said Christian Klein, vice president of government affairs for Associated Equipment Distributors (AED), which sponsored the research.  "As part of the broader tax and budget reform debate, Congress needs to do something bold to put the program back on solid fiscal footing."

The William and Mary study offers a few possible solutions.  The gas tax was last increased - to 18.4 cents per gallon - in 1993.  The research team determined that restoring the gas tax's 1993 spending power by raising it to 25 cents and indexing it for future inflation would raise $167 billion above current baseline spending requirements over the next two decades.  The study also examined ways to implement a vehicle mileage-based user fee.

"We hope Congress will take these findings to heart and act quickly to identify new revenue streams for the road program," AED President & CEO Toby Mack said.  "Highways are the arteries of commerce and the arteries are clogged.  The longer lawmakers wait to tackle the problem, the worse it'll get and the harder it'll be to fix."

The full report is available at http://www.aednet.org/government/pdf-2013/WM-HTF-Report.pdf