Fuel tax hike support waning as Washington preps for $1.8 trillion infrastructure package

The drumbeat is growing in Washington for a major infrastructure spending bill estimated at $1.8 trillion to help alleviate long-delayed highway, bridge and other vital U.S. assets.

If enacted, the deal the Biden administration and Democratic lawmakers are considering would be the biggest infrastructure spending commitment since the Depression-era New Deal in the 1930s.

Whatever form the bill takes, the key as always is how to pay for it. The Highway Trust Fund has needed $140 billion in transfers from general revenue since 2008, according to the Tax Policy Center.

One obvious answer seems to be fading. Support is lagging to raise the fuel tax – 18.4 cents a gallon on gasoline, 24.4 cents on diesel, unchanged since 1993. Any tax increase is sure to raise the ire of Republicans, who nevertheless approved a $1.8 trillion tax cut under then-President Donald Trump.

But it’s not just Republicans who are against raising the fuel tax. The leading transportation official in the Biden administration appears to be throwing cold water on that idea as well.

Transportation Secretary Pete Buttigieg, speaking before a gathering of top officials of the American Association of State Highway Officials (AASHTO), said all aspects of funding are on the table to help pay for the highway reauthorization.

But Buttigieg appeared cool to raising the fuel tax to keep pace with inflation, which would be the simplest way to pay for new infrastructure.

“I don’t think fuel tax is where the energy is going to be,” the Transportation Secretary told the AASHTO virtual gathering on Feb. 25. One reason is the rise in electric vehicles, which obviously run without paying a fuel tax.

That comment came despite two-thirds of states raising state fuel tax levies over the past decade. Even Buttigieg noted, “A lot of states have stepped out and raised revenue, including very conservative places like Indiana,” the former mayor of South Bend noted.

But the Highway Trust Fund remains a different animal. It has needed infusion of $154 billion in general fund transfers to remain solvent since 2008. Recognizing the political landscape, Buttigieg said the need is glaring.

“We have to come up with revenue,” he said. “It feels so many different principals are on the table. (But) the ‘user pays’ principal may not be the only way Congress feels about that.”

He said “whether it’s upstream or at vehicle level, some kind of vehicle mile tax” might make sense. “We certainly see some things done on the commercial side and we could move in that direction,” Buttigieg added.

Buttigieg’s overriding sentiment was everything is on the table. “What I’m saying is we’re very open-minded. But it has to be sustainable, predictable and affordable so it doesn’t place a burden on poor people.”

But he warned, “The future on the revenue side is not going to look like the past.”

No matter how they plan to pay for it, Democrats say a huge infrastructure spending package is necessary, worthy and timely. Sen. Debbie Stabenow, D-Mich., is thinking big. She noted there is an estimated $836 billion backlog for highways and bridges and $122 billion in transit.

When asked by Stabenow at a recent congressional hearing what impact such spending would have on infrastructure, fellow Michigander Victoria Sheehan, president of AASHTO, replied: “Jobs in transportation are good-paying jobs and given the impact of the COVID-19 pandemic, investing in infrastructure will truly help us build back better.”

Any delay in surface transportation reauthorization legislation “would wreak havoc across the country and would impact not just state DOTs, but our partners such as local governments and the construction industry,” Sheehan told a Senate Committee on Environment and Public Works hearing Feb. 24.

Sheehan is commissioner of the New Hampshire Department of Transportation and AASHTO president. Sen. Tom Carper, D-Del., the committee’s new chair, said he expects a bill out of his committee by Memorial Day. The current bill expires in September.

Predictably, Republicans on the powerful Senate Environment and Public Works Committee (EPW) are tapping the breaks and saying they worry about busting the budget.

For instance, West Virginia Sen. Shelley Moore Caputo, the ranking Republican on the EPW Committee, warned against a “multitrillion-dollar package stocked full with ideologically driven, one-size-fits-all policies.”

In the past, Congress has kicked the can down the road with a short-term fix at current funding levels, the last of which occurred late September when Congress once again demurred in hard choices.

Don’t look for such a quick fix this time. The new, Democratic-controlled Congress seems poised to act—soon.