Obama Administration Pushes Congress on Highway Funding

The United States Highway Trust Fund is a transportation fund set up by the government. The fund comes from the federal fuel tax income which covers both gasoline and diesel fuels. It is mainly used to fund road (re)construction and maintenance. It also supports some public transportation projects. Now the problem is that the funding contract is going to end in this September, while the actual money in the fund will be gone at the end of August. This is a serious dilemma that is going to affect most of its projects and more importantly, 700,000 jobs. So here is the part where politics comes in. Although the Obama administration is proposing a new bill that will end the business tax break and states will be able to charge tolls on interstates in order to raise money, the Republicans are not happy about it.

The Highway Trust Fund now is supported by a federal tax on gasoline that has not been changed since the ‘90s. It is pretty obvious that cars are becoming increasingly efficient nowadays and they require way less fuel compared to those in the ‘90s. With the inflated cost of maintenance, it would be impossible for the Fund to keep up with the demand. Without going into politics, in order to keep the Trust Fund intact, I think raising the federal tax on fuel is totally necessary even if it is going to boost up the gas price.

Source: http://online.wsj.com/news/articles/SB10001424052702303851804579558341265925278

7 comments to Obama Administration Pushes Congress on Highway Funding

  • Joseph Kimbell

    American politics has really messed up public policy surrounding gas taxes. The best way to encourage the purchase of cars with high MPG ratings is through making gas more expensive. However, politicians have turned gas prices into a political animal that has gotten out of control. Adding taxes to gasoline is political poison at the moment. In fact, many presidential candidates run on a platform that includes lowering gas prices, which theoretically they shouldn’t be responsible for at all. New Gingrich, for instance, ran on a promise of $2.00 gasoline. The U.S. is going to have to address this problem soon or we will never see the end of gas guzzlers.

  • Michael Barry

    I think it seems like it would be a lot easier to either get rid of the gas taxes or just use them for something more directly related to fuel, like the exploration for alternative energy sources. Roads could charge toles and use that funding for new roads, and this would help avoid all the bureaucracy.

    • Tolls don’t work, they discourage driving, and as a network externality, the benefits come from having a bigger and faster system, not one that leads people to game things. Now rather than tolls, a tax on CO2 output or miles driven or … all have problems. So let me propose you do a paper on road financing in various countries, does it make sense to tie roads to vehicles or driving, or is that merely a political expediency that is perhaps US-specific?

  • Jier Qiu

    To Michael, getting rid of fuel taxes would make oil company very happy. No tax means higher demand, and the oil price would rather go up. All the extra profit goes directly into the pockets of the big oil companies. The problem here is that the Fund needs more money. Looking for alternatives would work out for a higher gas tax but that would take a longer time period. Imagine if the Fund dries out next year and all of the interstate would be unmaintained for a whole year.

    • reed

      If the government were to get out of the oil game, hopefully they would also eliminate all of the subsidies to the oil companies, which would at minimum cancel out the benefits of the reduced consumer taxes.

  • Kade Kenlon

    Perhaps it is time to consider a more durable type of material for cars to drive on. It seems every time we drive on the interstate we run into some sort of construction. Although asphalt is relatively easy to lay down, it lasts for only about 10 years. Concrete for example lasts for 50 years but it is tough to replace.

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