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- Feb 18, 2003
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The Federal Gas Tax and the Highway Trust Fund was never intended to pay for highways fully, if "fully" is defined as all costs, capital and expense, for all highways down to neighborhood streets. The Highway Trust Fund was established to fully fund federal highway construction grants for both Interstate highway construction (@90%) and qualified arterial highway construction (@50%). From 1956 until 2008, the Highway Trust Fund did just that. It fully funded all the federal contributions for highway construction, and a lot more. That "a lot more" includes rail.FYI, the original Federal fuel tax was imposed to pay down the deficit. The first Federal fuel tax was imposed in 1932 by then President Herbert Hoover. It wasn't until Ike came along in the late 50's with his dream of the Interstate Highways that the fuel tax got diverted to the highways.
Once the initial Interstate Highway system was built by 1972 IIRC that money was supposed to revert back to its original purpose of paying down the national debt. That however never happened. In 1990 President George H W Bush raised the Federal fuel tax by 5 cents and sent half that to the HTF and half to deficit reduction. President Clinton in 1993 raised the fuel tax by another 4.3 cents with the money going to deficit reduction.
All of that however changed in 1997, when all the monies going to deficit reduction were sent back to the highways instead. And the fuel tax has remained unchanged since 1993, currently 18.4 cents per gallon.
And the Federal gas tax has never generated enough revenue to pay for the highways fully. From 1956 to 1993 the 4.3 cents per gallon fuel tax imposed on the diesel fuel that the freight RR's use for their engines went into the Highway Trust Fund. Now that 4.3 cents just goes into the General fund.
Starting in 1983, the Highway Trust Fund became a source of funding for the Urban Mass Transit Administration (now the Federal Transit Administration). Although initially a relatively minor source, the Highway Trust Fund now provides 80% of the entire budget of the FTA, which means 80% of FTA grants for rail transit projects come from the federal gas tax and the Highway Trust Fund. The Highway Trust Fund now provides about $8 billion per year to fund the FTA. That is about 16% of the all Highway Trust Fund disbursements.
In 2008, the Highway Trust Fund essentially went broke. The fund required an $8 billion infusion of general tax funds to remain solvent and support all the approved projects. But, it was not just highway projects that resulted in the shortfall. It was transit projects as well.
I'm not saying that there is anything wrong with using gas tax revenue to support transit. In fact, it makes a lot of sense. However, that diversion of funds should be considered when assessing the viability of federal gas tax revenue for supporting federal highway grants. It is a little duplicitous for transit to take 17 cents of every dollar of the Highway Trust Fund, and then point to the insolvency of the Highway Trust Fund as proof that the highway funding mechanism does not work anymore.