Highway Trust Fund Hurt by Tax Revenue Losses

This story appears in the Jan. 23 print edition of Transport Topics.

Mirroring the devastation the recession wreaked on the trucking industry, revenue from taxes truckers pay to support the nation’s highway system plummeted during the global crisis and has yet to fully recover.

The drop in trucking industry revenue accelerated depletion of the Highway Trust Fund, requiring Congress to replenish the fund with general revenue.

In federal fiscal year 2008, the first year of the recession, tax revenue from new truck, trailer and bus sales — one of several federal levies truckers pay — dropped 62% from the previous year, according to data obtained from the U.S. Department of Transportation.

In fiscal 2007, the sales tax generated $3.809 billion for the trust fund but, in 2008, only $1.446 billion, DOT tax reports show. Since then, the revenue has edged back up, reaching $2.417 billion in fiscal 2011, which ended Sept. 30.

The sales tax is 12% of the retail price of new tractors and trucks with a gross vehicle weight of more than 33,000 pounds and of trailers with a GVW of more than 26,000 pounds.

The dramatic drop in sales tax revenue was the “primary factor” in a 2009 trust fund shortfall that Congress had to offset with money from the general fund, said Darrin Roth, director of highway operations for American Trucking Associations.

In order to maintain 2011 transportation spending levels of about $40 billion, federal lawmakers have said they must find $6 billion in new revenue for each of two years, 2012 and 2013.

“It would really help if trust fund revenue was greater than it is, and the more money we get in, obviously, the less general fund money that we need,” Roth said.

Ninety percent of trust fund revenue comes from the 24.4-cent per-gallon federal tax on diesel fuel and the 18.4-cent tax per gallon on gasoline.

Both ATA and the U.S. Chamber of Commerce have called on Congress to raise fuel taxes.

ATA Chief Economist Bob Costello said he is not certain trust fund sales tax revenue best reflects the recession’s effect on trucking. The revenue picture more closely reflects truck buying cycles, he said.

In 2006, truck sales soared in part because of purchases that carriers placed in advance of new stricter environmental regulations, Costello said. “Then volumes plummet; they didn’t get the mileage on the trucks that they normally got, they can hold onto the trucks longer and they went through a few years of not buying very many trucks,” he said.

Sales of U.S. Class 8 trucks in 2006 reached 284,008. By 2009, though, they were down to 94,798, according to WardsAuto.com, an industry research firm in Southfield, Mich., which recently reported that sales for 2011 were up to 171,358.

In terms of the recession’s effect on trucking and the Highway Trust Fund, however, truckers pay other levies besides fuel and sales taxes whose revenue streams also showed a dramatic narrowing.

Federal tire sales tax revenue fell 32% between 2007 and 2009, from $461 million to $314 million. Truckers pay a sales tax on tires with a maximum rated load capacity in excess of 3,500 pounds. The tax is 9.45 cents per each 10 pounds in excess of 3,500. In 2011, DOT tax records showed tire tax revenue was up to $441 million.

There also is a tax on trucks with a gross vehicle weight of 55,000 pounds or more. That annual heavy vehicle use levy is $100 plus $22 for each 1,000 pounds or fraction thereof in excess of 55,000.

In 2007, the use tax generated more than $1 billion in revenue for the trust fund but by 2010 revenue had fallen to $887 million, a 12% drop.

Fuel tax revenues flowing into the highway fund also fell during the recession, although diesel tax revenue fell off more dramatically than gasoline tax revenue.

Diesel tax revenues into the trust fund’s highway account fell 16% between 2007 and 2009, from $8.3 billion to $7 billion. During the same period, gasoline tax revenue into the account fell only 3.3%, from $20.6 billion to $19.9 billion.

In 2011, diesel tax revenue into the trust fund’s highway account was up to $8 billion and revenue from the gas tax into the account was up to $20.6 billion, according to the DOT.

Trust fund revenue patterns remind people how the fund operates, said Joshua Schank, former transportation advisor to Hillary Clinton and president of the Eno Center for Transportation, a Washington think tank and advocacy group.

“They think about the gas tax and the fact that it hasn’t been raised . . . but there are other elements . . . aligned with the state of the economy,” Schank said. He added that as the economy picks up, truck tax revenues will increase.

“There’s a lot of dependence on truck revenues,” he said of the trust fund. “And in some ways that’s a good thing in the sense that the trucking industry is coming out of the recession faster than others.”