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Long-Term Fix for Highway Trust Fund

Now that Congress has approved a short-term fix for the Highway Trust Fund, there's much talk about the need for a long-term fix. A University of Virginia Miller Center report, co-chaired by former U.S. Transportation Secretaries Norman Mineta and Samuel Skinner, proposes one. The report concludes that future funding mechanisms should not depend primarily on fossil-fuel consumption and suggests that the best approach to ensure adequate funding is to return to a pay-as-you-go system. This means taxing road use, instead of fuel consumption, via a vehicle-miles-traveled (VMT) tax. An excerpt from Well Within Reach: America's New Transportation Agenda is below. You can read the entire report at http://web1.millercenter.org/conferences/report/conf_2009_transportation.pdf.

The Interstate Highway System was built with the premise that users of roadways would pay for them. As originally conceived, the Highway Trust Fund (HTF) achieved this linkage by using a fuel tax to generate revenues for highway construction and maintenance. This made sense as long as the fuel use was closely aligned with road use and as long as the revenues raised by the fuel tax were adequate to meet highway funding needs.

Increasingly, however, that is no longer the case. The level of the fuel tax has not kept pace with funding needs, and the overall funding gap can be expected to grow as the average fuel economy of the American vehicle fleet improves. To cover the shortfall, Congress has had to divert general funds to the HTF, exacerbating the overall federal budget deficit.

Many proponents of transportation reform have concluded that the best approach to ensure adequate funding and re-align incentives for road use is to return to a pay-as-you-go system. This means taxing road use (instead of fuel consumption) via a vehicle-miles-traveled (VMT) tax.

The technology exists to implement such a tax in ways that also address privacy and regional equity concerns. Moreover, a VMT-based system could be designed to advance other public policy goals, such as incentivizing travel at different times of day or differentiating among types of vehicles based on their emmissions performance or the amount of wear they impose on highways. In short, the technology exists to design funding mechanisms that are not only more rational, but that also create the market signals needed to address important transporation externalities.

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