The federal Highway Trust Fund (HTF) is doing a disappearing act. After years of steeply rising revenues, receipts did an abrupt U-turn last year and look as if they will recover very slowly. Because receipts are now tied directly to the amount that states get to spend on federal-aid highway projects, truckers can look forward to a Hobson's choice of crumbling, crowded roads or paying much more.
The trust fund gets revenue from three fuel taxes and three taxes on trucks. All but 0.1¢ of the 24.4-¢/gal. federal tax on diesel fuel and kerosene and the 18.4-¢ gasoline tax go into the HTF. However, only 10.5¢ of the 13.1-¢ gasohol tax goes into the fund. The trust fund also gets all of the revenue from the 12% “retail” excise tax on the first sale or long-term lease of new tractors, straight trucks over 33,000 lb. GVWR and trailers over 26,000 lb. GVWR; a manufacturers' tax on truck tires; and an annual heavy vehicle use tax on vehicles and combinations with a GCW of 55,000 lb. or more.
During the late 1990s, all of these revenue sources rose faster than predicted, particularly the new-truck excise tax, as truck owners went on a buying spree. Then the good times stopped rolling, and so did the trucks. New-truck receipts plunged 45% and receipts from diesel, tire and highway use taxes also slumped.
Looking forward, truck sales and mileage should revive as the economy recovers. However, increasing durability of equipment, better fuel economy on new trucks, and perhaps some substitution of natural gas or biodiesel for diesel fuel may limit the growth of the traditional truck-related revenue sources. Meanwhile, gasohol and possibly hybrid gas-electric engines will depress the growth of gasoline taxes. As a result, existing HTF revenue sources are unlikely to grow fast enough to keep existing highways from wearing out faster, let alone provide for added lanes, which cost even more.
Limited relief will come about if Congress goes along with the provision championed by Senate Finance Committee Chairman Max Baucus (D-Mont.) to place the 2.5¢/gal. of gasohol revenue that now goes to the general fund into the HTF instead. A more ambitious variant of that transfer is to make the HTF whole for the 5.3¢/gal. subsidy that gasohol receives. But either of these changes would require cutting other spending programs, raising nonhighway taxes or running a larger deficit. Understandably, the prospects are not bright.
Transportation Secretary Norman Mineta has already said the Administration would not favor increases in HTF taxes. The Associated General Contractors of America has called for indexing the fuel taxes for inflation, as a few states do. Congress might find such a step more palatable than overt increases. However, at the present low rates of inflation, such a step would raise only about $600 million per year.
The Treasury Dept. has said that it is concerned about several forms of excise tax evasion, and may propose some simplifications that would simultaneously lessen evasion and bring in additional revenue without explicitly raising tax rates. However, it has not said which simplifications it favors.