The Heritage Foundation

Factsheet #148

July 21, 2014

July 21, 2014 | Factsheet on

Which Way for the Highway Trust Fund?

Background on Highway Trust Fund

  • The Highway Trust Fund (HTF) was created in 1956 to finance the construction of the interstate highway system, which was largely completed by the early 1980s.
  • The current 18.4 cents per gallon gasoline tax, 24.4 cents per gallon diesel tax, and related fees pay for a portion of current highway and transit spending. Moving Ahead for Progress in the 21 Century (MAP-21), the current law governing federal highway and transit programs, authorizes about $14 billion more in annual spending than the HTF collects in revenue.
  • Since 2008, Congress has diverted $54 billion from the General Fund of the Treasury to the HTF.

Need for Spending Reforms to HTF

  • The HTF is filled with fuel taxes and fees paid by motorists, truckers, and bus operators. More than 25 percent of HTF dollars are diverted to subways, streetcars, buses, bicycle and nature paths, and landscaping—at the expense of road and bridge projects.
  • Transit consumes 17 percent of HTF dollars, yet accounts for little more than 1 percent of the nation’s surface travel. Most mass transit commuting destinations (54 percent) are in just six cities: the metropolitan areas of Washington, D.C., New York, Boston, Chicago, Philadelphia, and San Francisco.

Cost of HTF Mandates

  • The HTF imposes mandates on states that reduce the value of federal fuel tax dollars.
  • HTF spending for road and bridge projects goes through the regulatory wringer. For example, prevailing wage requirements under the Davis-Bacon Act hike the cost of federally funded construction projects by 10 percent. According to the organization Common Good, the average federally mandated environmental review for a highway project takes more than eight years.
  • States must allocate their federal fuel tax dollars based on the preferences of Washington bureaucrats and special interests, not the needs of local transportation users.

Budget Gimmicks or Fuel Tax Hikes Won’t Fix the Problem

  • H.R. 5021: Highway and Transportation Funding Act
    • Transfer to HTF: H.R. 5021 transfers $10.8 billion from the General Fund to the HTF.
    • Customs Fees: The bill extends customs fees, otherwise set to expire in 2023, by one year. The $3.5 billion budget impact of this change appears in 2024, the last year of the budget window.
    • Pension Modifications: The legislation reduces required funding of employer pensions, which CBO projects will lead to $6.4 billion of corporate tax revenue and higher premiums to the Pension Benefit Guaranty Corporation (PBGC) in the ten-year window, but also increases risk of a taxpayer bailout of the PBGC outside of that window.
  • Senators Chris Murphy (D–CT) and Bob Corker (R–TN) propose hiking federal fuels taxes by 12 cents per gallon over two years. Car and truck drivers and bus operators would pay a gas tax of 30.4 cents a gallon and a diesel tax of 36.4 cents a gallon.

What Should Be Done?

  • Limit HTF spending to match available revenue; remove spending diversions, including subways, streetcars, buses, bicycle and nature paths, landscaping; avoid federal tax hikes or future bailouts of the HTF.
  • Devolution: Senator Mike Lee (R–UT) and Representative Tom Graves (R–GA) have introduced the Transportation Empowerment Act (S. 1702 and H.R. 3486) that would incrementally lower the federal fuels taxes and refocus the federal highway program to a limited set of activities over five years. In turn, the states would be empowered to assume this taxing authority and use their highway resources to solve their transportation challenges as they deem appropriate.

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