Federal fuel tax in jeopardy

Federal fuel tax in jeopardy

Both the federal highway bill and the federal fuel tax must be reauthorized by the end of next month and though they are separate pieces of legislation, it will be impossible to debate, let alone pass one, without debating the other

Both the federal highway bill and the federal fuel tax must be reauthorized by the end of next month and though they are separate pieces of legislation, it will be impossible to debate, let alone pass one, without debating the other. This confluence of great consequence to trucking hopefully will garner the necessary attention of Capitol Hill in the coming weeks so that both measures can be passed by September’s end.

Per a tax legislation update prepared by Nancy Faussett, CPA, and posted on BNASoftware.com, these are provisions of the Highway Trust Fund excise tax rates that will expire come Sept. 30:

All but 4.3 cents per gallon of taxes on highway gasoline, diesel fuel, kerosene, and alternative fuels [Secs. 4041(a) and 4081(d)(1)]

  • Reduced rate of tax on partially exempt methanol or ethanol fuel [Sec. 4041(m)]
  • Tax on retail sale of heavy highway vehicles [Sec. 4051(c)]
  • Tax on heavy-truck tires [Sec. 4071(d)]
  • Annual use tax on heavy highway vehicles [Sec. 4481(f)]

According to a post on DC.Streetsblog.org by Congress-watcher Tanya Snyder, “No one on Capitol Hill is seriously suggesting an increase in the tax, and transportation advocates are just hoping no one targets it for a cut.”

Snyder notes that while expiration of the highway reauthorization bill is “the subject of much fanfare, the impending expiration of the gas [sic] tax has mostly flown under the radar, and that’s just the way many advocates want it.”

While it is too soon to say whether or not the fuel tax will be up for a cut, advocates for raising the fuel tax include trucking’s largest lobby, the American Trucking Assns. (ATA).

Back on Dec. 1, ATA – along with 20 other advocacy groups—issued a news release that praised former Sen. Alan Simpson and former White House Chief of Staff Erskine Bowles, co-chairmen of the National Commission on Fiscal Responsibility and Reform, for their proposal to phase in a 15-cent federal fuel-tax hike “to ensure the U.S. surface transportation network is strategically upgraded to promote and accommodate future economic growth.”

In the joint release, the lobbies stated they supported the phased-in increase because “it reinforces the long-standing policy of pay-as-you-go financing by system users as the foundation of the federal surface transportation program’s success over the past half century.”

The release went on to state that such an increase in the federal fuel tax would have two immediate and tangible results: “The new revenues would help stabilize the Highway Trust Fund, which the Congressional Budget Office currently forecasts would require $34 billion in general funds to prevent devastating cuts in federal highway and transit investments through FY2016…[It] would also allow Congress to move forward with a long-term reauthorization of the surface transportation program that provides the resources and policy reforms necessary to facilitate long-term economic growth.”

According to a “web memo” posted online last month by Ronald Utt, Ph.D, the Herbert and Joyce Morgan senior research fellow in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation, since the mid-’90s, legislative attempts have sought to “phase out the [existing] federal highway program by shifting the existing federal taxing authority to states in a multi-year phase-out that would restore most surface transportation responsibility—and the revenues to fulfill it—to the states.”

However, noted Utt, that solution has been considered too extreme by some, including states that would benefit from it. As a result, such “turnback” legislation “never gained much traction and has not been a serious contender to displace the increasingly dysfunctional federal program.”

The Heritage Foundation, however, recognized that the all-or-nothing approach was a “deterrent to widespread support” and in 2004 devised a “hybrid proposal.” Utt said the proposal would allow the existing highway program to continue as is but permit states to opt out of it if they determined that doing so would be to their benefit.

“By opting out, the state—depending upon the plan—would collect or receive as a block grant all of the federal fuel tax revenues raised within its borders and would be entitled to spend them on transportation priorities of its own choosing.”

Utt pointed out that so far this year several pieces of opt-out legislation already have been introduced, including the State Highway Flexibility Act (H.R. 1585), introduced by Rep. William Lankford (R–OK); the Highway Fairness and Reform Act (H.R. 632 and S. 252), introduced by Rep. Jeff Flake (R–AZ) and Sen. Kay Bailey Hutchison (R–TX); and the State Act (H.R. 1737), introduced by Rep. Scott Garrett (R–NJ).

Utt stated that under an opt-out program, “a state would forgo its annual authorization from the Highway Trust Fund—with its many mandates, regulations, and dozens of specific spending allocations—and instead choose to receive its share of the federal fuel taxes collected within its borders.

“Depending on which bill became law, the state would either receive these revenues as a block grant from the U.S. Dept of Transportation equal to the federal fuel tax revenues collected in that state or directly collect, keep, and spend the 18.3 cents per gallon fuel tax once collected by the federal government in the state.”

At this stage of the game, it appears unlikely fuel taxes will be hiked and they may not be cut, either, given that highway funds are the generator of construction projects across the country.

It seems the wild card may well be whether or not Congress will seriously examine the various bills that if passed would implement the type of “opt-out” funding reform described in the Heritage Foundaton’s “hybrid proposal.”

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