September 2017 

Highway Trust Fund’s Tax Receipts Flatten in Fiscal 2017 While Traffic Sets Record Highs


Total collections of federal excise taxes for the Highway Trust Fund flattened in the first 10 months of the latest fiscal year, the Treasury Department has reported, even as traffic volume on U.S. roads continues to climb to ever-higher record levels.

The trends suggest what transportation investment advocates have long warned against – that the current structure of various highway user taxes in the trust fund cannot be counted on to keep up with steadily growing demand on the nation's roadway infrastructure.

In its July monthly budget statement, the Treasury said HTF excise tax collections net of refunds reached $31.712 billion for October through July, slightly below the $31.830 collected at the same point a year earlier.

Meanwhile, the Federal Highway Administration reported that vehicle miles traveled on all the nation's roads increased by 1.6 percent for the first six months of the 2017 calendar, for another all-time high after another annual record high in 2016.

It has long been clear that the HTF excise tax receipts fall far short of what Congress authorizes to spend from that fund each year on federal highway and transit programs, an imbalance that has prompted lawmakers to repeatedly bridge the structural gap with general funds.

The current five-year surface transportation law, for instance, transferred $70 billion into the trust fund from general resources, paid for partly by drawing on an unrelated capital surplus at the Federal Reserve.

Because of that trend, transportation industry groups have been calling for Congress and the Trump administration to address the long-term solvency risks to the government's largest infrastructure fund by finding additional dedicated funding that would put the HTF back on solid financial footing.

Some have called for increasing and indexing to inflation the trust fund's main per-gallon user fees on gasoline and diesel fuel. Besides its various fuel taxes, the trust fund's dedicated fee mix includes sales and use taxes on commercial trucks and trailers, plus excise taxes on truck tires. Some industry groups have suggested broadening its array of user fees to include taxes on freight shipments that use the road networks, or adding taxes on tires used by passenger cars.

But expectations have also been that the HTF's dedicated excise tax receipts would continue to grow for some time, even if they slowed at times from such trends as volatility in heavy truck equipment sales and the addition of more fuel-efficient vehicles into the nation's passenger and commercial trucking fleets.

So this year's flattening of HTF tax receipts brings new attention – and potential urgency – to the long-term funding issue. It comes at a time when the Trump administration and congressional policymakers say they want to invest additional funds to improve vital transportation systems and other infrastructure.

Bud Wright, Executive Director of the American Association of State Highway and Transportation Officials, said that AASHTO's board, made up of the CEOs of state departments of transportation, has already called for Congress and the president to fix the trust fund as part of any new infrastructure investment package.

"What this latest data indicates," he said, "is that we cannot continue to look at history and expect the fund's current mix of dedicated revenue sources to always grow. Instead, we are losing ground as trust fund receipts lag while the system faces more and more demand. We hope the nation's leaders will act sooner than later, as this problem worsens."

AASHTO has developed a list of potential user-based revenue options for Congress to consider, along with the amounts of money they could bring in.

A detailed comparison of HTF excise tax receipts for fiscal 2017 versus 2016 indicates that a big drop in taxes collected on heavy truck equipment sales helped offset small increases from gasoline and diesel taxes.

However, the 10-month fiscal year totals also reflect record-high U.S. gasoline sales from calendar 2016 that may not be repeated in 2017.

In fact, the FHWA, which tracks gasoline sales reported by states for purposes of HTF contributions, said those sales flattened early this year and through May were actually 0.2 percent lower than in the first five months of calendar 2016.

In all, that shows the frailty of the various excise fees that now make up the user-based revenue stream feeding the Highway Trust Fund. Motor fuel tax collections that are the largest sources of revenue can rise or fall with market conditions – such as overall strength of the economy or spikes and drops in pump prices – and will inexorably weaken as more fuel-stingy vehicles and alternative-fuel models increase in number.

Meanwhile, the bulk of the other taxes depend on the strength of the trucking industry and sometimes volatile sales of high-dollar equipment, which can ebb or flow based on freight market demand and changes in interest rates for big equipment loans.

Reprinted from the AASHTO Journal, September 8 issue.


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