Friday, June 19, 2015

Raising the Gas Tax May Actually be Backed by the Freight and Road Haulage Lobby

US Must Decide on How to Fund Much Needed Improvements to Transport Infrastructure
Shipping News Feature

US – The Highway Trust Fund is a subject that tends to make everyone in the Handy Shipping Guide’s office bang their head against a hard surface due to the lack of political will to resolve the matter sensibly. This time it’s Paul Ryan, Chairman of the Ways and Means Committee, who has unsurprisingly ruled out what would most probably be the cheapest, quickest and most logical way of funding the once again near bankrupt infrastructure fund by simply raising the tax on fuel. Whilst in the UK hauliers representatives such as the Freight Transport Association and the Road Haulage Association have backed the FairFuel UK campaign to try for duty reductions on fuel, it seems that US trucking organisations may actually be willing to accept an increase if the cash is spent on infrastructure improvements.

Gas prices in the US remain ridiculously low in the eyes of many overseas observers but now the latest hearing on long-term transportation funding methods heard President and Chief Executive Officer of the American Trucking Association (ATA), Bill Graves, managing to get the viewpoints from the road freight industry across to the House Ways and Means Committee, and indicating and accepting a lot more could be done to stop yet another monetary patch, after dozens of previous multi-million dollar fix ups, in favour of a proper solution.

In a speech before the Committee, Graves set out the importance of a healthy infrastructure to the American road haulage industry, highlighting that highways are critical to the movement of freight and to the nation’s economy with trucks carry 9.7 billion tonnes of freight annually and accounting for 69% of the total market with a freight value of $10 trillion whilst carrying goods to the value of nearly one-third of the nation’s GDP. Trucks move three times more freight than all other domestic transport modes combined, with the industry a major source of jobs employing seven million people and representing 5% of the non-farm workforce. Graves explained:

“The trucking industry has long made a significant investment in surface transportation. In 2013, trucking companies paid $16.5 billion in federal fuel taxes, heavy vehicle use taxes, retail taxes on new trucking equipment and tire taxes. This represented 44% of total user fee revenue to the Highway Trust Fund. And this is in addition to the $21 billion in state highway user fees paid by carriers. Altogether the industry contributed nearly $40 billion annually toward transportation system investment nationwide, or six percent of total trucking revenue, not including tolls and permit fees.

“While the trucking industry already makes a substantial contribution to the Highway Trust Fund, clearly federal investment is falling short, and we are therefore willing to support an even greater commitment.”

Graves spoke of five possible solutions that the ATA are wholeheartedly ready to support, utilising the financial infrastructure already in place to create solutions that could benefit the Trust Fund in the best ways possible:-

Fuel Tax

An increase in the fuel tax, with indexing, could meet current and future highway investment needs. While improvements in vehicle fuel efficiency, particularly in light-duty vehicles, will have a progressively negative impact on revenue from fuel taxes, the fuel tax is today and will, for the foreseeable future, be a viable revenue source for the HTF. According to the Department of Energy, over the next decade on-highway fuel use will drop by just 5%.

Highway Access Fee

A new annual flat registration fee could be levied on all vehicles, with revenue deposited into the HTF. Since all states currently collect a registration fee the infrastructure is already in place for efficient, cost-effective collection. States could be permitted to retain a portion of the revenue to cover additional administrative costs.

Royalties from New Oil and Natural Gas Leases

A portion of the royalties from new energy leases would be deposited into the HTF. While short-term revenue estimates are relatively small, future income could be significant.

Barrel Tax on Imported Petroleum and Domestic Crude Oil

The federal tax code currently imposes a tax on crude oil prior to entering the refinery, and on imported petroleum. Therefore the infrastructure is already in place to collect an additional fee dedicated to surface transportation. While a significant share of crude oil is refined for on-highway use, a large portion is used for other products such as home heating oil and jet fuel. Mitigating the impacts of an increased tax on these industries is an important consideration.

Position on Current Proposals

The ATA has previously said that it is willing to support any proposal that addresses the long-term solvency of the HTF and meets the criteria outlined above. The ATA has evaluated the various proposals that have been introduced by Members of Congress and to date have issued statements in support of two bills in particular: the UPDATE Act which increases fuel tax, and The Bridge to Sustainable Infrastructure Act, which would provide for two years of HTF funding from fuel tax indexing.

Whilst supporting these plans, Graves took the opportunity to express the Associations opposition on some of the proposals already put forth including: an increase in Heavy Vehicle Use Tax, an Increase in federal excise tax, an increase in tyre tax, the implementation of a Vehicle Miles Travelled tax, and Interstate Tolls. In ending his testimony Graves urged the Committee to find a suitable solution, concluding:

“The committee must identify a long-term, stable and sufficient revenue source for the Highway Trust Fund. It is important for all to understand that the decisions made by this Committee over the next few months will have effects beyond the immediate solvency issues. The federal commitment to investment in transportation, if not properly addressed this year, could be placed in jeopardy for many years, or even decades, to come. This is not just an esoteric debate about a line item in a budget. Congress’ actions have real consequences, and the decisions this Committee makes will determine whether a business succeeds or fails and whether a job is created or is eliminated. And most importantly, these decisions will determine the safety of the motoring public as well as the safety and efficiency of the millions of professional drivers operating daily on our highway system.”

Instead of proposing a viable solution the Ways and Means Committee are seen by many as just burying their heads in the sand and now, after acknowledging that temporary fixes are not the way to go to fund a potential $168 billion shortfall in the next ten years, Chairman Paul Ryan stated outright his opposition to raising the gas tax, instead choosing to say in his opening speech:

“We are confronted with a big problem. And there’s no easy solution. By the end of July, the Highway Trust Fund will begin running out of money - again. I was hoping last month that we could have extended the highway trust fund through to the end of the year, but that ran into last-minute opposition. It’s going to be difficult to reach consensus on a permanent solution.

“But there are lots of ideas out there. And that’s why we’re here today: to hear more about them. There’s talk of handing more authority over to the states, making greater use of tolls, creating more public-private partnerships. There are a lot of ideas worthy of consideration. But either way, we need to find a real solution—a permanent solution.”

To the world at large it seems that US politicians once again are far more concerned with vested interests than guiding and managing the country in the appropriate manner. Subjects such as gun control, much vaunted by President Obama and sneered at by other representatives, or a rise in gas prices, stand little or no chance of acceptance by the bulk of politicians despite the overwhelming evidence that strong action is needed. To the outside world it seems this misnamed committee lacks the will to find either the ways or the means to permanently resolve a situation which is costing lives.

Photo: The I-5 Skagit River Bridge which collapsed after a truck struck overhead supports in 2013 after having been described as ‘functionally obsolete’ and ‘fracture critical’ and although well maintained, falling short of modern construction standards.