House and Senate leaders searching for a financing mechanism to pay for the nation’s highway programs have proposed a host of fixes, including taxing international profits, cutting returns on government investments and even selling oil from the Strategic Petroleum Reserve. What they have not proposed is any kind of real long-term funding mechanism that will provide more than a few years of financial stability.
With just two weeks to go before the Highway Trust Fund runs dry, momentum is growing for a short-term extension, to give members of Congress more time to find a viable solution. And there is broad consensus on Capitol Hill that Congress should agree on a transportation deal that extends as long as possible. The current trend of short-term extensions, lawmakers on both sides agree, is inefficient and ineffective.
But the consensus ends when it comes to figuring out just how to pay the tab.
The House overwhelmingly passed a five-month, $8 billion transportation bill Wednesday, sponsored by House Ways and Means Chairman Paul Ryan (R-Wis.). Ryan wants to use the intervening months to allow lawmakers to devise an international tax reform plan, which would include a repatriation of overseas U.S. corporate profits to pay for a new six-year highway deal.
Senate Republicans appear to be moving in a different direction. While Senate Majority Leader Mitch McConnell (R-Ky.) has yet to release the details of his transportation plan, his version is likely to be a more modest reauthorization of between two to four years, potentially paid for by budget offsets like cutting the return rate on federal employee investment options.
But even if one of those proposals becomes law, it will only solve the infrastructure-funding crisis for a few years. Whether it’s by budget offsets in fiscal year 2016 or a one-time repatriation of corporate profits, the funding mechanism Congress settles on this time won’t be available to a future Congress, whether it’s two, four or six years down the line.
Patrick Sabol, a senior research assistant at the Brookings Institution, says that Americans have bought into a myth about how their transportation infrastructure has been financed for the past several years.
“We operate under this illusion that the users of roads pay for the roads,” he said in an interview. “They don’t really.”
Highway funding is theoretically tied to a federal fuel tax, currently set at 18.4 cents per gallon. But that tax is not indexed to inflation and has not been raised since 1993, creating shortfalls that have required lawmakers to transfer money from the general fund into the transportation account.
The obvious solution, raising the fuel tax, is politically impossible. A recent Morning Consult poll found that only 37 percent of registered voters would support a gas tax increase. And even were lawmakers to hike the tax, doing so would be unlikely to solve America’s highway problem.
That’s because Americans are driving fewer miles total with more fuel-efficient vehicles, which makes the gas tax a less effective funding method than it has been in the past. Raising the gas tax rate could give drivers an incentive to stay off the road – and further drive down tax revenue.
“The current federal surface transportation funding structure that relies primarily on taxes imposed on petroleum-derived vehicle fuels is not sustainable in the long term and is likely to erode more quickly than previously thought,” a 2009 report from the National Surface Transportation Infrastructure Financing Commission concluded.
Instead, transportation experts advocate a more direct user fee, known as vehicle-miles traveled. The idea is that with the advancement in GPS technology, drivers could be taxed based on how many miles they drive.
The vehicle-miles traveled tax – which, in an era of data breaches and skepticism about government snooping, is also politically unfeasible – isn’t even an effective short-term solution. Transitioning to such a system would take several years, and privacy and civil liberties advocates are already critical. Plus, while VMT might be a more effective mechanism than a fuel tax, it still doesn’t get around the fact that Americans are driving less.
One state, Oregon, is testing a vehicle-miles traveled tax system. In 2013, the state legislature approved a pilot program for 5,000 drivers, which started earlier this month. Positive results there might inspire Oregon to implement a comprehensive program and encourage other states to follow suit.
Congress is unlikely to leap into action, even if Oregon experiences outstanding results. No major VMT proposals are on the table in this year’s highway debate.
That doesn’t surprise Sabol, who said that the nation’s surface transportation infrastructure suffers from more than just a funding gap.
“There is no vision for what the program is,” Sabol said. “What do you want the Highway Trust Fund to do? What is the next big thing?”