What is the Highway Trust Fund, and how is it financed?

Many people are oblivious to the Highway Trust Fund, I know I paid no attention when I heard it mentioned. It’s important when we complain about roads or hear politicians talk about infrastructure.

But guess what, just like Social Security, politicians have ignored their responsibility to keep the fund solvent even growing. It seems every time they set up a funding method that requires direct taxes from individuals, succeeding Congresses are more interested in votes than doing their job and telling people the truth about paying for promises.

Social Security last raised the payroll tax rate in 1990, Medicare in 1985, over thirty years ago. Both funds are getting closer each day to insolvency.

The current tax rates are 18.4 cents per gallon for gasoline and ethanol-blended fuels and 24.4 cents per gallon for diesel (0.1 cent of each tax is dedicated to the Leaking Underground Storage Tank Trust Fund). The tax rates on motor fuels have not changed since 1993 and thus have failed to keep pace with inflation. If tax rates had been indexed for inflation since 1993, the current tax on gasoline would be about 33 cents per gallon and the tax on diesel fuel would be about 44 cents per gallon.

Source: What is the Highway Trust Fund, and how is it financed? | Tax Policy Center

2 comments

  1. In my state, state gas taxes are used for “mass transit” (AKA homeless transport system), bike lanes and various other non road “improvements” while we are forced to drive on disintegrating street and highways. Given this, it’s gonna be a cold day in hell before I vote for any increase in fuel taxes.

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  2. In 2016, between a ballot question and a NJ law that was passed, New Jersey funds its share of the Transportation Trust Fund (TTF) program with a fuel tax. They came up with a formula to provide revenue over 8 years to fund $16 billion in projects. If the revenue is not collected to pay the bonds that they issued for the projects, the fuel tax is raised automatically. Kind a of smart for government to dedicating a funding source, right?

    So what happen? Vehicle fuel economy improved. Electric vehicles buy no fuel. The fuel tax had to be raised in 2019. Then covid came along and people were forced to stay home. The result was gasoline consumption dropped by 38.7%. October 2020 NJ fuel tax was raised another $0.09 per gallon. NJ now collects $0.402 per gallon and another $0.135 for the federal government or a total of $0.507 per gallon.

    Of note here is that the federal government did not raise its fuel tax for covid which can only mean that its TTF is bleeding cash with the slowdown in consumption, not to mention the push for more electric vehicles.

    I am not oppose to taxing those who use the roads via the fuel tax, although with EV the game is changing. But we all benefit from roads so maybe that is not fair either.

    What I am opposed to is spending money we don’t have and issuing of TTF bonds and Grant Anticipation Revenue Vehicles (GARVEEs) to fund projects. One day the debt will just crush us and we will be taxed to dead to pay those bonds back.

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