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Why a Gas Tax Is About Deficit Reduction

One of the candidate recommendations from the National Commission on Fiscal Responsibility and Reform is to increase the federal tax on gasoline by 15 cents per gallon by 2015. The proceeds from that increase would be dedicated to the Transportation Trust Fund, which is the source of funding for the nation’s highway and transit programs.

Why is the gas tax about deficit reduction if the funds don’t flow back to the general fund from the U.S. Treasury?

Simply put, it’s because the gas tax doesn’t generate enough revenue to cover the costs of the federal transportation program. Part of the problem is that the tax has not been raised, even to keep pace with inflation, since 1993. And as Americans have been driving less and driving more fuel efficient cars, they are buying less gas, so the tax is generating less revenue overall. So on three separate occasions since September 2008 a total of $34.5 billion in general funds have been used tobackfill the transportation account to keep it from running a negative balance. And this does not even include the general fund money that regularly funds some transit and safety programs, nor the $35.9 billion in general funds for highway and transit projects as part of the American Recovery and Reinvestment Act. (Click for a table showing recent general fund infusions into the Highway Trust Fund.)

Fortunately, the commission’s report recognizes the significance of this problem. In addition to the 15 cent tax hike, they call for the transportation program to live within its means. So the spending would match, not exceed, the revenues coming in. But importantly, they also call for an overhaul of the program to focus more on high-return priority projects. That’s something we’ve been after for quite some time.