Rolling piggy banks

Joseph Kile outlined the problem with the Highway Trust Fund quite simply. There’s more money going out of the fund than what’s coming into it.

Kile, the director of microeconomic analysis for the Congressional Budget Office, testified in front of the U.S. Senate Committee on Environment and Public Works during an April hearing on how to make the Highway Trust Fund solvent.

“For more than a decade, the government has been spending more from the Highway Trust Fund than the revenues collected for it,” Kile said.

The current structure of the Highway Trust Fund generates most of its revenue through gas and diesel taxes, in addition to various taxes on heavy trucks. However, trends toward more fuel-efficient vehicles, including electric vehicles, means the fuel tax packs less of a punch than it once did. Additionally, the fuel tax rates have not increased since 1993.

If things don’t change, Kile told the committee, the balances from the Highway Trust Fund’s highway account and transit account will be exhausted in 2022. According to the Congressional Budget Office’s estimates, the Highway Trust Fund’s total shortfall over the next 10 years will be $195 billion.

“If the trust fund balances were to be exhausted, the federal government would not be able to make payments to states on a timely basis,” Kile said. “As a result, states would face challenges planning for transportation projects because of uncertainty of the amount or timing of payments from the Treasury.”

The insolvency of the Highway Trust Fund is important to truckers for at least a couple of reasons.

First, a lack of funds for highway projects means the continued deterioration of the nation’s roads and bridges. Earlier this year, the American Society of Civil Engineers’ infrastructure report card gave the United States a C-minus overall – a D for roads and a C for bridges. A lack of money to repair roads and bridges means the problem will only worsen.

Insufficient infrastructure can cost truckers in a variety of ways, including inefficiency caused by excessive traffic and vehicle damage arising from poor road conditions.

The American Transportation Research Institute estimates that the operational costs incurred by the trucking industry from traffic congestion were $74.5 billion, or $6,478 per truck. A 2018 survey conducted by the Owner-Operator Independent Drivers Association Foundation found that OOIDA members spend about $5,000 annually on repairs caused by poor road conditions.

“One out of every 5 miles of highway pavement is in poor condition, and our roads have a significant and increasing backlog of rehabilitation needs,” OOIDA wrote to the U.S. Department of Transportation earlier this year. “Because of the poor infrastructure conditions, individual drivers lose thousands of dollars annually.”

A second – and perhaps even more important – reason truckers should be concerned about an insolvent Highway Trust Fund are the “solutions” that government officials produce.

Too often those solutions involve imposing additional costs on the trucking industry. Rather than increasing the fuel tax on everyone or finding a way to charge all highway users in an equitable manner, such proposals as a truck-only vehicle miles traveled tax or truck-only tolls are proving popular.

And as the burden of paying for transportation projects is more frequently left in the hands of states, it is becoming more common for tractor-trailers to be viewed as rolling piggy banks to be dipped into every time funding becomes a problem.

Because there are fewer truckers than nontruckers, it is much easier to convince voters to get behind a tax increase on the trucking industry rather than the general population.

“The only tax anyone likes is a tax someone else has to pay,” OOIDA President Todd Spencer told Mark Willis, host of Sirius’ Road Dog News, on an episode this past spring.

Funding options

At the April hearing, Kile presented senators with a few possible routes they could take to make the Highway Trust Fund solvent again.

Kile’s first option presented was to increase existing fuel taxes. Since October 1993, the taxes have been 18.4 cents per gallon on gas and 24.4 cents per gallon on diesel. Kile said increasing those taxes by 15 cents per gallon in October 2022 would eliminate the shortfall and provide $95 billion for additional spending by 2031.

Another option, Kile said, is to institute new taxes.

“Policymakers could institute new taxes on vehicle miles traveled or on electric vehicles,” Kile wrote in his testimony. “One option would be to impose a VMT tax on commercial trucks. CBO has estimated, using data from 2017, that if such a tax was applied to all commercial trucks on all roads and all of the practical steps necessary to implement it were in place, each additional cent of tax would generate $2.6 billion per year.”

Kile noted that some states, including Kentucky, New Mexico, New York and Oregon, already levy vehicle miles traveled taxes on commercial trucks.

Without increasing the fuel tax rate or instituting new taxes, the other option, Kile said, would be to transfer money from the Treasury’s general fund.

25 cents per mile?

Not surprisingly, some lawmakers latched onto the truck-only vehicle miles traveled tax as being the most politically viable option.

During a Senate Committee on Finance hearing in May, Sen. John Cornyn, R-Texas, called corporate tax increases or general fuel tax increases “political nonstarters.” Instead, Cornyn suggested a 25-cent-per-mile fee on most Class 7 and Class 8 trucks. Although it likely doesn’t offer much consolation to truckers, Cornyn’s 25-cent-per-mile proposal would eliminate the Federal Excise Tax and the Heavy Vehicle Use Tax. Under the proposal, a motor carrier that logs 125,000 miles in a year would be on the hook for $31,250.

Kile, who also was a witness at the Finance Committee hearing, told Cornyn that it would cost a lot of money to put such a tax in place.

“A VMT tax does have the potential to raise significant revenue,” Kile said. “The challenge would be that the type of mechanisms for collecting and enforcing the tax aren’t yet in place, and those would need to be developed. And the cost of doing so could be substantial.”

Cornyn said his truck-only vehicle miles traveled tax proposal would generate about $33 billion each year and seemed undeterred by any challenges from initiating the tax.

“I’m sure the administration of that would be a challenge … any sort of new approach,” Cornyn said. “But right now we have a big hole in the Highway Trust Fund, and we have to come up with some money from somewhere. And I would just propose respectfully that we call this what it always has been under the Highway Trust Fund, and that’s a user fee. As I indicated earlier, I don’t think there’s any political support for an increase to the gas tax.”

States looking for funding

Even if a truck-only vehicle miles traveled tax doesn’t gain support at the federal level, many states are turning to truckers when they need extra cash.

In June, Connecticut Gov. Ned Lamont signed into a law a highway user fee on Class 8 through 13 trucks.

Trucks that weigh more than 80,000 pounds will pay 17.5 cents per mile beginning in 2023.

One state senator said it was time to stop giving truckers a “free ride,” and Lamont was unfazed by any threats of truckers avoiding Connecticut highways.

“Well, that’s not so bad either,” Lamont said. “We’ll have a little less traffic on the road, a little less asthma for the people who live along the road, and we’ll still have the resources we need to make the investments we’ve got to.”

In Alabama, a proposal to solve congestion issues in the Mobile area would require all trucks more than 46 feet to use a new Mobile River Truck Bridge and pay a $15 toll.

Rhode Island launched a truck-only toll in 2018 and has been in a legal battle with the American Trucking Associations. OOIDA sued in a similar case over truck-only tolls in Indiana.

If the Highway Trust Fund is depleted by 2022, even more states could look to truckers for the funds they need.

‘Discriminatory’funding

In May, OOIDA wrote to the Senate Finance Committee with the message that truckers are more than willing to chip in for improvements to roads and bridges, but they do not want to be viewed as government’s personal ATM.

“With the nation’s roads and bridges deteriorating and congestion increasing, truckers are willing to contribute more to the expansion and preservation of this system so long as user fees remain equitable among all highway users,” OOIDA wrote. “However, they will not accept funding mechanisms that are discriminatory toward our industry.”

Examples of discriminatory funding mechanisms that must be avoided, OOIDA says, include a truck-only vehicle miles traveled tax, federal toll expansion, and congestion pricing. Instead, OOIDA supports efforts to increase Highway Trust Fund revenue through reasonable increases to the federal gas and diesel taxes.

Collin Long, OOIDA’s director of government affairs, said a truck-only vehicle miles traveled tax is a way to avoid a politically difficult choice of increasing taxes on all highway users. However, Long said truckers need to make sure that lawmakers know that they will not stand for discriminatory funding tactics.

“It’s abundantly clear elected officials in Washington still lack the courage to increase user fees for all highway users,” Long said. “So they continue to look for easy targets to generate more revenue. In their desperation, they have come back to a truck-only VMT scheme. And again, truckers need to make it clear to the people who represent them that this type of discriminatory funding proposal is equally untenable.” LL