Solutions to the long decline of fuel-tax revenues provide no easy road ahead as every option is fraught with feasibility issues and political pressures.
That’s according to panelists at the National Federation of Municipal Analysts' annual conference last week, who cited registration fees, toll roads and mileage-based user fees as the most sustainable and viable options for making up for losses in fuel tax revenue.
“Transportation funding is under pressure, both at the federal and state level, the country is still growing and the amount of driving really isn’t going down,” said David Klinges, managing director at Piper Sandler. “But nobody's really coming up with new solutions on transportation.”
Increasing fuel-taxes, which many states have done, provides states with short-term revenue but ultimately directs demand further toward electric vehicles in the long-term, Klinges said.
“We’ve seen a lot of states have increased their gas taxes. That's a Band-Aid, that's not going to solve their lack of demand for fuel,” Klinges said.
That fuel taxes are inadequate as a funding source to finance roads with the proliferation of more efficient and electric vehicles has been noted for years. The average vehicle pays $18 a month in fuel taxes, with trucks paying $36 every month, fuel efficient vehicles pay $7 and electric vehicles pay nothing, said Angela Fogle, transportation specialist at the U.S. Department of Transportation.
“As you can see from that, there's really an issue here that we have to deal with,” she said.
Vehicle registration fees, which are present in every state, do impose a tax by vehicle, tying the source of revenue to the user of the vehicle. But that issue becomes more complicated when trying to account for commercial vehicles.
“But the problem with registration fees is that you can register your car in a different state, particularly commercial vehicles, which are going to hunt for the lowest registration fees for their fleet,” Klinges said.
Toll roads are often seen as another solution, as they could
“It's just a rounding error in terms of transportation funding,” Klinges said. “We don't have much to do with toll roads and that's really not going to change.”
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But some still worry about how far that money can really go to implement such complex programs.
“I was a financial adviser to the Oregon office of innovative partnerships when they did the first pilot program 16 years ago,” Klinges said. “In those 16 years, the only progress that's been made and towards making this actually practical solution is that Oregon teamed with California and Washington to talk about the solution on a multi-state basis.”
“They haven’t come up with anything but at least they're recognizing that stopping these drivers at the state border is really going to penalize in-state users, and basically give free rides to out of state users,” Klinges added.
Keeping records of the miles each driver posts may spill into political discussions about individual liberties, as someone, whether the government or a private entity, would have to keep track of how far the car is driving.
“There's a difference between being tracked by the government and being tracked by the private sector,” said Denvil Duncan, associate professor at Indiana University. “I think one option is to design the tax in such a way that the data that’s being used to calculate the tax liabilities stays in the private sector,” he added. “There's no need for the government to have that data in order to calculate.”
Klinges said the program is generally in the “death throes” with questions of how it’s going to operate, which has largely been the conclusions of feasible studies that Congress has looked at in the past.
“Congress is not going to mandate putting in devices that can track where you go, it just goes against the privacy concerns that come up on a number of levels,” Klinges said. “The second thing is just the inability of Congress to pass new taxes,” he added. “It's just not how people get reelected is to approve new taxes.”
