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AED Washington Insights Newsletter

AED Washington Insights

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Prepared by Christian A. Klein, AED Vice President of Government Affairs
and the AED Washington team

New AED Study Examines Fuel Efficiency Impact On Gas Tax Receipts, Projects $365 Billion Highway Fund Shortfall

As automobile fuel economy increases, the federal highway program's fiscal position will become ever more precarious, according to findings from a new AED-commissioned study by researchers at the College of William and Mary.

The team from William and Mary's Thomas Jefferson Program in Public Policy forecasts that over the next 23 years, as Corporate Average Fuel Economy (CAFE) standards rise, gasoline consumption will decline. This will lead to a drop in gas tax payments to the federal Highway Trust Fund (HTF), the highway program's primary funding source. Failing to change the existing tax structure while maintaining current investment will cause the HTF's account to incur a $365.5 billion deficit over the next 23 years, the study concludes.

The highway program is already in dire straits. Although it has been self-sustaining for many years thanks to the gas tax and other user fees, declining revenues have made transfers from the general budget necessary to prevent road and bridge spending cuts. Myriad studies have shown that merely maintaining current spending is insufficient to build the infrastructure our growing economy needs. One report by the Texas Transportation Institute found that traffic congestion, resulting in large part from inadequate capacity, costs the country more than $100 billion per year in wasted time and fuel.

"HTF revenues are inadequate to support today's road and bridge spending levels, which are already well below what's needed to maintain the interstate system's performance," said AED Vice President of Government Affairs Christian Klein. "As part of the broader tax and budget reform debate, Congress needs to do something bold to put the program back on solid fiscal footing."

The William and Mary study offers a few possible solutions. The gas tax was last increased - to 18.4 cents per gallon - in 1993. The research team determined that restoring the gas tax's 1993 spending power by raising it to 25 cents and indexing it for future inflation would raise $167 billion above current baseline spending requirements over the next two decades. The study also examined ways to implement a vehicle mileage-based user fee.

"We hope Congress will take these findings to heart and act quickly to identify new revenue streams for the road program," AED President and CEO Toby Mack said. "Highways are the arteries of commerce and the arteries are clogged. The longer lawmakers wait to tackle the problem, the worse it'll get and the harder it'll be to fix."

The full report is available at:

CBO/TTI Reports Confirm Gloomy Highway Trust Fund Numbers
Days after AED released its study, the Congressional Budget Office (CBO) and the Texas Transportation Institute unveiled new reports confirming the HTF's dismissal future and the consequences of inaction.

On Feb. 5, CBO issued a report projecting the impending demise of the HTF. According to the report, the fund will be bankrupt by Fiscal Year 2015, one year after the most recent highway bill, MAP-21, expires. The CBO's projections estimate a $92 billion annual shortfall by 2023 unless lawmakers find new and sustainable revenue streams.

On that same day, new research from the Texas Transportation Institute found that in 2011 congestion cost Americans more than $121 billion in wasted time and fuel.

Now is the time for bold action to ensure the vitality of our nation's highway system. Visit today to urge your lawmakers to find new revenue streams for the HTF.

Article Date: February 2013
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