Reimagining Surface Transportation Reauthorization

Pro-Market Recommendations for Policy Makers

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Many transportation policy observers estimate that stagnating revenues and increases in fuel efficiency will cause the current fuel tax–reliant Highway Trust Fund to implode sometime within the next 15 years. Until that implosion, fuel taxes will become extremely regressive, as the wealthy would avoid the taxes with new, highly fuel efficient or all-electric vehicles, shifting the fuel tax burden to the working poor. This is an outcome no one wants to see.

As of March 2015, the Congressional Budget Office (CBO) is projecting a 10-year $168 billion shortfall in the federal Highway Trust Fund (HTF), with the Highway Account accounting for $125 billion of that cumulative shortfall, and the Mass Transit Account for $43 billion. By the end of Fiscal Year 2025, CBO is projecting annual outlays from the HTF’s Highway Account to exceed annual revenues and interest by $16 billion (47 percent), with outlays from the HTF’s Mass Transit Account exceeding revenues and interest by $6 billion (150 percent).

The HTF has faced similar problems for a decade. In the lead-up to the last reauthorization in 2012, a variety of HTF bailouts were floated by lawmakers. These ranged from “drilling for roads,” which failed, to “pension smoothing,” which passed. During the current reauthorization debates, drilling for roads is back. Private pensions, having been excessively smoothed in July 2014’s highway bill extension, can no longer be used as a source of fictional revenue. But lawmakers from both parties are now considering corporate tax repatriation schemes to bail out the HTF, including a bill sponsored by Sens. Rand Paul (R-Ky.) and Barbara Boxer (D-Calif.). In addition, Rep. John Delaney (D-Md.) and President Obama are advocating for different tax repatriation HTF bailout packages.

All of these bailout schemes should be rejected. Short of abolishing the current federal surface transportation programs and returning that responsibility to the states, there are a number of reforms policy makers can take that will ease the current fiscal crunch while preparing the nation for innovative transportation technologies and practices.

Most of these sensible transportation policies run counter to the six-year reauthorization bill recently introduced by Sen. James Inhofe (R-Okla.). The bill, the Developing a Reliable and Innovative Vision for the Economy Act (DRIVE) Act (S.1647), largely keeps intact the MAP-21 framework and fails to make key changes, some of which are endorsed by the Obama White House. Worse, it actively harms existing financing tools such as those provided under the Transportation Infrastructure Finance and Innovation Act, which are needed by the private sector to compete in the transportation infrastructure market. And given Sen. Inhofe’s repeated admission of, “I am a big spender in two areas—infrastructure and national defense,” fiscal conservatives should be wary of his efforts regarding transportation policy, where his positions are largely indistinguishable from those of his colleague Sen. Barbara Boxer (D-Calif.).