Drivers Cut Back On Driving — Highway Taxes Hardest Hit
Kurt Brouwer July 21st, 2008
Oh the humanity! Due to higher prices, Americans are driving less. It’s the old supply - demand syndrome. Higher prices leads to lower demand. We’ve been told we needed to cut back and we did. So, that’s all good, right?
Not exactly. Now, we find out the Federal highway trust fund is going to go broke if we keep cutting back. From the Los Angeles Times, this piece tells the story [emphasis added]:
U.S. Highway Trust Fund Veers Towards Crisis (Los Angeles Times, July 21, 2008, Richard Simon)
Soaring gasoline prices are hurting Uncle Sam in the wallet too.
As motorists cut back on their driving and buy more fuel-efficient cars, the government is taking in less money from the federal gasoline tax.
The result: The principal source of funding for highway projects will soon hit a big financial pothole. The federal highway trust fund could be in the red by $3.2 billion or more next year.
The fund, set to finance about $40 billion in transportation projects next year, is increasingly strained. And the problem has taken on greater urgency as lawmakers face a backlog of projects to maintain the nation’s aging interstate highway system and ease traffic congestion.
“The situation has only been exacerbated by rising fuel prices, which are causing motorists to drive less and resulting in less revenue for transportation improvements,” said David Bauer, senior vice president for government relations at the American Road and Transportation Builders Assn.
California risks losing $930 million, or about a third of its federal highway allotment, Caltrans Director Will Kempton said in a letter to the state’s congressional delegation. Kempton warned that unless Washington acted to address the shortfall, projects could be delayed, reduced or canceled.
In the short run, lawmakers are scrambling to figure out how to close the gap. Federal highway spending nationwide could be cut by a third beginning Oct. 1, according to the American Road and Transportation Builders Assn.
“The condition of the highway trust fund has been deteriorating for years, but skyrocketing gas prices have made an already dire situation worse,” said Sen. Patty Murray (D-Wash.), head of the Senate transportation appropriations subcommittee. “We are now less than a year away from a bankrupt trust fund, which would leave critical construction projects in peril.”
In the long run, lawmakers must figure out whether the 18.4-cent-a-gallon federal gasoline tax, which helped bring in money when fuel-hungry SUVs were hot, is still a viable way to fund transportation projects amid heightened concern about gasoline prices, U.S. dependence on foreign oil and global warming.
The federal gasoline tax is tied to every gallon sold, not every dollar spent, so federal gas tax revenue goes up only if consumption increases. This year, consumption is projected to drop for the first time since 1991.
Vehicle miles traveled on the nation’s roads are trending downward for the first time since the oil shocks of the late 1970s and early 1980s, according to the Cambridge Energy Research Associates consulting firm…
No doubt this will get resolved. However, in a broader sense, it is a good reminder of just how complex our economy is and how we have to pay close attention to the unintended consequences of a particular change. The highway trust fund was, essentially, predicated on a continually rising number of miles being driven such that revenues from gas taxes would go up and up. Life does not always work that way though. Just pointing this out…
Via: BrothersJuddBlog
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