Boxer Proposes Fuel-Tax Overhaul For Funding U.S. Highway Projects

This story appears in the Sept. 30 print edition of Transport Topics.

The head of the Senate committee that will write the next highway funding bill said last week she wants to end the federal fuel taxes that truckers and others pay at the pump.

Sen. Barbara Boxer (D-Calif.), chairwoman of the Environment and Public Works Committee, said alternatives could include taxes at the oil refinery level, a wholesale tax on oil distributers or sales taxes.

“There are many ideas out there, and the one that I’m leaning toward myself . . . is to be able to do away with the per-gallon fee at the pump and replace it with this sales fee as they’ve done in Virginia and Maryland,” Boxer said at a Sept. 25 hearing of the Environment and Public Works Committee.

Several speakers warned that, without a long-term funding solution, the nation faces a rapidly deteriorating transportation system in which more than 150,000 bridges have been labeled deficient.

On the day of the hearing, officials in Wisconsin announced they had closed a major crossing in Green Bay, the 33-year-old Leo Frigo Bridge, because a 400-foot section suddenly started to sag. Initial inspections revealed a pier on the east side of the bridge over land has settled.

The bridge, which carries Interstate 43 traffic, could be closed for up to a year, state officials said.

The interstate runs from Wisconsin’s southern border through Milwaukee. It crosses through Green Bay before connecting to U.S. 41, which runs into Michigan.

The Senate hearing was held a week before Oct. 1, the 20th anniversary of the last time federal gasoline and diesel taxes were increased.

According to the Congressional Budget Office, the Highway Trust Fund is expected to be unable to meet its obligations by early fiscal 2015, which begins Oct. 1, 2014.

American Trucking Associations and the U.S. Chamber of Commerce are among the groups that have called for higher fuel taxes.

“We appreciate . . . Boxer having a frank discussion of the challenges we face in paying for our roads and bridges and especially her realization that we need to continue to have a link between the fuel we use

and infrastructure,” said ATA President Bill Graves.

“There are no other funding mechanisms that can get us the revenue we desperately need to meet our obligations, and doing nothing simply is not an option,” Graves said.

While the Senate Finance Committee, not EPW, writes the section of highway bills that address funding, Boxer said there are many “exciting” ideas to replace per-gallon federal fuel taxes.

In addition to wholesale taxes and sales taxes, she mentioned a carbon tax, which she acknowledged is controversial.

One funding idea, she said, would “follow the lead of some of our states that are turning to a percentage highway fee that is paid for at the refinery level, and this could bring in more than all of the other taxes bring in for transportation.”

The current highway funding law expires Sept. 30, 2014.

Boxer and others at the hearing repeatedly mentioned the new transportation funding plans implemented this year by Virginia and Maryland, plans that rest on a combination of new sales taxes and wholesale taxes on oil distributors.

However, while Virginia fuel purchasers no longer pay the tax at the pump, they do pay a per-gallon tax on fuel.

“The tax will still be assessed and collected at the wholesale [rack] level, just as it was before, and it is assumed that the tax is passed on to the customer at the pump, just as it was previously,” said Dale Bennett, president of the Virginia Trucking Association.

And Maryland did not eliminate the per-gallon fuel taxes it charges at the pump. In addition, both states indexed some portions of their new fuel levies so they would increase automatically with inflation.

Several speakers at the hearing said they supported indexing.

“We need to look at indexing the fuel taxes to one or more variables to maintain or increase the purchasing power over time,” Greg Cohen, president of the American Highway Users Alliance, told the committee.

“Congress cannot allow the Highway Trust Fund to run off a cliff like ‘Thelma and Louise,’ ” said Ray Poupore, executive vice president of the National Construction Alliance, a laborers group that also supports indexing.

The fund is supported largely by the 24.4-cent diesel tax and the 18.4-cent gasoline tax, but with increasingly fuel-efficient vehicles available, the revenue stream has been narrowing for more than a decade.

Congress has been supplementing the fund for years with transfers from the general fund, and the annual transfers have reached almost $10 billion.

“Those days are over,” Boxer warned. “We’re trying to struggle to get rid of the sequester that’s hurting our economy deeply,” she said.

“I hope we succeed, but we certainly have no room to go the general fund to fund highways and transportation. It’s not going to happen.”