Raise gas tax by 11 cents and adjust to inflation to save Highway Trust Fund, tax policy group says

There is one easy and necessary way to revive the beleaguered Highway Trust Fund: raise the federal gas tax by a minimum of 11 cents per gallon and adjust it for inflation, according to Carl Davis, senior policy analyst with the Institute on Taxation and Economic Policy (ITEP).

“Inflation has driven the gas tax down by almost 40 percent,” Davis said. “Construction costs have risen 60 percent over the last 20 years. A project that cost $2 million then costs $3 million now. The tax just doesn’t have the purchasing power it once did.”

Of each tank of gas purchased, about $3 goes to the Highway Trust Fund. “And that’s simply not enough,” said Davis of ITEP, a non-profit research organization that focuses on federal, state and local tax policy issues.

Rather than growing with inflation every year, the gas tax has been steady at 18.4 cents per gallon for more than 21 years.

Over the past two years some 16 states including Maryland, Utah and Road Island, have increased their state gas taxes or adjusted them to inflation, and if they can do that, then so can Congress, Davis said.

The House this week voted to patch the Highway Trust Fund which pays for highway and bridge repairs until July 31, and the measure now moves to the Senate. Congress has passed a short-term extension for the Highway Trust Fund 33 times since 1993, Davis said.

“It can be easily fixed but it’s a matter of politics,” Davis asserted. He added while an 11 cent-per-gallon increase would adjust for inflation, “Congress patching the system is just buying time and delaying the inevitable. A one-time boost in the gas tax rate will not address the unavoidable, ongoing impact that inflation will have in the future,” Davis added.

Davis suggests lawmakers should look to other parts of the tax code for inspiration. Numerous tax brackets, exemptions, deductions, credits, and even the alternative minimum tax are now tied to inflation so that they can grow modestly every year and retain their “real” value, he said.

The bottom line is, Davis said, is that someone has to pay for road infrastructure and that’s going to be the American taxpayer. “We’re all inconvenienced by traffic congestion or get mad at blowing a tire running over a pot hole,” he said. “It’s just a matter of Congress enacting a package that works and unfortunately Congress hasn’t been very good at that.”

And as Memorial Day approaches, so does the busy summer construction season when, once again, state and local governments will not know how much funding, if any, they may receive this season.