USA Transport Fund

History and Introduction

The Inter-state highway system holds a special place in the hearts of many Americans even to this date. It came to be formed around the same time TV was discovered. Though the invention of the Television is much celebrated the formation of the interstate highway system is something that is much more significant and impactful in the lives of the people living in the US. This is something that was created as a result of the work and toil of many people including labours, engineers, policymakers and government officials etc. This was the realization of a dream for people who have worked behind for years. President Dwight D Eisenhower signed the National System of Interstate and Defense Highway Bill in the year 1956. This was the legislation the pioneered America's development of The Interstate Highway System. The speciality of this was that the Federal Government worked in partnership with the State government to construct these infrastructures. Highways in the states were constructed by the funds given by the Federal Government. The designs and planning also had to be approved by the Federal Agents. America’s Highway program was in direct control and influence of the Federal government right from the planning to construction and even repairs and reconstruction. 

 

The Issue of Funds for HTF (A FEDERAL GAS TAX FOR THE FUTURE)

The HTF is responsible for the highway constructions. Majority of its fund comes from the gas tax. Tax on gasoline and diesel pay for 82 % of the countries Transport funds. The amount is estimated to be around $ 3 billion annually. The rate of fuel tax is fixed at 18.4 cents per gallons of gasoline and 24.4 cents per gallon for diesel since 1993. At this rate, the revenue collected by the Federal Government from the gas tax is very low concerning the high infrastructure construction and development demand of the United States today. The increasing cost of construction along with reduced use of gasoline by the drivers have put a severe strain on the amount of revenue collected. While more gasoline efficient cars are resulting in less gas purchase by the people the cost of building the highways and other infrastructure continues to rise. We can say that with time, the more money is being needed for the projects but the revenue that is coming in is lowering day by day. The Federal gas tax is not included in the inflation and its tax rate remains constant at 18.4 cents per gallon.

 

(CONGRESSIONAL RESEARCH SERVICE)This paints a clear picture of a shortage of fund in the Highway Transportation Fund. These deficit is being fulfilled by the Federal Treasury’s Deficit Fund for many years now. Congress has provided about $143.6 billion already since 2008. The ‘Fixing America’s Surface Transportation Act’ signed by President Barack Obama in 2015 paid for $70 billion of these deficits. (CRS) Shortly all accounts that provide for the deficit of the transport sector will be exhausted unless serious changes are brought about in the Gas tax rate and modes or revenue collection. I believe if we continue on the same path of raising The Highway Transportation Fund from the age-old law, which is fixed at 18.4 cents per gallons of gasoline and 24.4 cents per gallon for diesel the deficit of fund collection is going to rise every year until it becomes a burden too heavy to bear. Steps need to be taken to solve this problem so that we can move toward a better infrastructure and Road development. 

 

SOLUTIONS and ARGUMENT

Readjusting The Gas Tax- In such a situation of the fiscal deficit, a good way to restore some balance in the revenue and expenditure of the HTF would be to increase the gas tax rate according to the inflation. From 18.3 cent per gallon, the price of gasoline could be raised to 31.8 cents per gallon. The tax on diesel could be raised from 24.3 cents per gallon to 42.2 cents per gallon.  

According to the Congressional Research Service, this an increase in one penny can raise the fund by $1.8 billion per year. However, as there are more fuel-efficient and electric cars in the market these days that would also cause reduced use of gasoline or diesel. Therefore, this solution cannot be a permanent saviour to the HTF’s fund crisis but can be an effective way to progress with some additional collection for the next few coming years. 

Fund from Sales Tax- Tax can be charged based on the percentage of retail fuel price rather per gallons used. In this way, the public has to pay a sales tax on every purchase. Shortly even if the consumption reduces, the tax can be charged on the retail price of fuel and not on gallons purchased.  This comes with a negative possibility too. That is if the prices of fuel were to fall sharply the rate of tax or fund being collected by this method would also fall. This could have on the HTF’s fund. This would be a good solution to collect Highway Transport Funds through Federally imposed sales tax on fuel. Again if more hybrid electronic cars take over the scene in the next years there could be fund crisis for the HTF’s treasury

 

Vehicle Miles Travelled Charges (VMT) – This method of charging a driver according to the distance he or she has travelled can be a good way to collect transport funds. The total cost of road use can include wear and tear charges, air pollution charges and traffic congestion. 

The distances travelled by the vehicles can be estimated from the ode meter or even through a GPS tracking system. However, installing GPS on all vehicles is a very expensive procedure. It also intrudes the personal privacy of the public. Administrating and collecting tax from such a huge population would also have its difficulties.

 

Carbon Taxes- Vehicles could be charged on the number of emissions. This would also ensure that drivers use less emitting technologies that would protect the environment. The carbon taxes could partially be given for the Highway development

 

Electric Vehicle’s Fee- The electric vehicles do not have to pay for fuel taxes. Therefore, they can be charged an extra fee from the Federal government. Slowly electric vehicles will be more popular which will result in the reduction of gasoline and diesel vehicles. That would mean a considerable reduction in the Highway Transport Fund. To mitigate this loss of fund the Congress can implement a system of tax collection from the electric vehicles and these funds can be given for Highway and Road development.

 

Tolling or Congestion Pricing: the US has about 20 of the world’s most congested cities and with an increasing number of population and vehicles these congestions will increase and spread to other cities too.  Collecting congestion tax can be a good way to gain funds for the Transport sector in the US. Funds from tolls that reach the Transport The development sector is very low so unless there is a high rise in the toll taxes this option cannot be explored for our purpose. 

Even though the federal governments manage and plan the HTF’s projects the fund from tolls reach private institutions or local governments. So charging congestion taxes under the Federal administration would be the best choice for raising the funds for the HTF 

 

Role of Private Business:  No matter what policy is implemented, we see that they all come with drawbacks and are unable to address long-term challenges. One fact that stands constant is that funds from the Federal sources are limited and shrinking. On the other hand, the need for developing transit infrastructure is ever-growing.

 

A partnership between the public sector and private businesses can reduce the stress on the government bodies while meeting the demand of the infrastructural needs of the countries Highway Transportation Fund. It is the state and local the government that works with private businesses. Generally, private institution leases a government asset in exchange for future benefits revenue. They may also introduce a new asset or service in the transit or highways for the public to use. 

 

The private business makes a new service or an asset available to the public for use and it is the government that pays an amount to the private firms. This is done because the people would not have paid for services directly from the private owner. When these facilities are under the government they are available, free of cost to the people. The Private-public partnerships do face ideological and political opposition but there are more advantages to this prospect. Private sector involvement can bring about more efficiency in management, operation and innovation of the transport sector and its fund's allocation and expenditure. Since involving the private sector can ensure long term project assessment and reduction in time loss and dispute this would directly reduce the cost incurred by the state local and federal government in the transport and highway sector.

We can note from the above analysis that sticking to the old fundraising method of 18.4 cents per gallons of gasoline and 24.4 cents per gallon for diesel does not fulfil the demand of the current construction expenses. Besides, this rate of pricing involving gallons as a unit of calculation of the fund to be paid by users is obsolete. Where vehicles are becoming more fuel-efficient there is a call for an immediate need to change the way funds for the HTF is raised. The immediate thing to do would be to follow the Congressional Research Service’s recommendation and increase the rate of charges per gallons of gasoline and diesel. However soon as more and more vehicles will become fuel-efficient and electricity runs we have to be ready for charging taxes under the VMT method. This will also reduce the risk of automobile theft as there is a need to install GPS in the vehicles. 

 

The federal treasury cannot fulfil the Transport deficit very soon so what would be the vision ahead. Including the Private sectors is the perfect thing to do. It will not only allocate funds but also new assets and result in the development of better quality projects. There will be clear monitoring and investment of funds on behalf of the State by the private sectors. Besides, this will make sure that the projects comply with the air quality standard imposed by the Environment Protection Agency that was formed by the 1970 clean air Act. Concerning the National Environmental Policy Act 1969 and the Clean Air Act 1970 implementing a strong Carbon tax will not only help in reducing vehicles with high carbon emission but also be a source of revenue for Highway Transportation Fund. It is not only the Federal, State and Local governments along with the private companies that need to help to make the transport sectors funding and quality better but we as citizens too have a big role. We as citizens can let the authorities know exactly where the development projects are needed and what the progress of current projects are. This will save the time effort and money of many officials and bring about better results. Citizens should be involved in the transport sectors development projects through attending community meetings held in their respective localities. You can give the best transport solutions in your area. Provide input via email be a member of the citizens advisory committee and also invite transport officials to your local clubs to hold discussions about how everyone can contribute.

 

In conclusion, I would like to say that it is high time that the officials both from the state and the congress along with the public, in general, get conscious about the importance of Highway Road Transportation and Transit services. We must modernize our approach to allocating funds for the Highway Transportation Fund so that every other aspect of our lives stay in balance and we get to live a high standard of life in every region of the United States. 

 

Reference:

 

Crsreports.congress.gov. 2020. CRS Reports. [online] Available at: <https://crsreports.congress.gov> [Accessed 16 September 2020].

 

ITEP. 2020. A Federal Gas Tax For The Future. [online] Available at: <https://itep.org/a-federal-gas-tax-for-the-future/> [Accessed 16 September 2020].

 

SEEY, B., 2006. INTERSTATE’S ANNIVERSARY. [online] Onlinepubs.trb.org. Available at: <http://onlinepubs.trb.org/onlinepubs/trnews/trnews244.pdf> [Accessed 16 September 2020].

 

Slideshare.net. n.d. Citizen Guide To Transportation Decision Making. [online] Available at: <https://www.slideshare.net/StateofUtah/citizen-guide-to-transportation-decision-making> [Accessed 16 September 2020].