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What Is the Highway Trust Fund and What Does It Do?

The gas tax model for generating money to build and fix roads and bridges is challenged by technological changes. The HTF may need fixing soon.

Every day Americans drive freeways, highways and roadways without considering who – or what – maintains those mediums, or who – or what – pays for it. Worn out asphalt, pavement and concrete on America’s highways isn’t the same as cracks on a driveway or sidewalk that can be easily fixed by the local asphalt contractor or concrete construction company. Local, state and federal governments build and maintain infrastructure, but Americans pay the bill.

With the purchase of every gallon of gas, motorists contribute 18.4 cents to the Highway Trust Fund (HTF). For vehicles, mostly commercial trucks, that run on diesel fuel the amount is 24.4 cents per gallon. And if you drive a truck, particularly one that pulls a trailer, you contribute even more in a schedule of sales taxes, use taxs (miles driven) and an excise tax on the tires used on those trucks and the trailers they pull.

“Contribution” defined as mandated taxes, of course. Not that anyone should complain, given how the HTF is used to build and maintain highways and, to a lesser extent, public mass transit. For the average driver, that amounts to $96 per year that their gas tax contributions go into the federal fund. It’s worth mentioning that states, counties, and cities might have their own additional gas taxes, adding to what drivers pay for the use of the roads.

Combined, the regular and diesel federal gas taxes, along with the additional taxes that pay into the HTF, were slated to generate $43 billion in fiscal year 2020. While the actual numbers aren’t yet final, it will likely be far less due to reduced driving in the course of the coronavirus pandemic. Worse, outlays from the fund are in excess of $50 billion, a shortfall similar to what has been happening since the recession of 2009-10.

Such shortfalls are a matter of simple math and mechanics. The gas tax that feeds the HTF is based on gallons used, not the price. Historically, gas consumption was a good measure of use – the larger the vehicle and the greater number of miles driven, the more gas used and concurrently the greater wear it placed on the pavement and bridges. But with the advancement of fuel-efficient vehicles absolute revenues declined. Note that the costs for building and maintaining highways have mirrored the inflation rate, which means the cost of road building and repair is up by about one-third in nearly 30 years. Inflation and innovation were never factored into the HTF’s gas tax revenue equation.

This gap between declining revenues and increasing costs has been made up for by Congressional budgetary allocations from general funds. Done semi-annually, it is driven by a sense of emergency (more money needed for roads and bridges!) than any kind of grand strategy, effectively shifting the burden from road users to all taxpayers – regardless of whether or not the taxpayer even owns a car.

It may be possible to raise the gas tax, although there are plenty of forces working against that. It may also be possible to change the system from gas purchases to one based in vehicle miles driven, but that would require installation of tracking devices, which would add to the price of driving overall. It also touches on matters of privacy if there is electronic tracking of where a vehicle travels.

More likely, it will mean less building and scaled back maintenance – which is saying greater congestion and poorer quality roads. The political climate has a lot to do with what may result in the new presidential administration under a new Secretary of Transportation.