The federal Highway Trust Fund (HTF) is running out of money. Congress will likely pass a short-term fix for the program in coming weeks. Over the longer term, many policymakers favor raising taxes to close the $14 billion annual gap between HTF spending and revenues.
Tax-hike advocates say the gap is caused by insufficient gas tax revenues. It is true that the value of the federal gas tax rate has been eroded by inflation since it was last raised two decades ago. But the gas tax rate was more than quadrupled between 1982 and 1994 from 4 cents per gallon to 18.4 cents. So if you look at the whole period since 1982, gas tax revenues have risen at a robust annual average rate of 6.1 percent (see data here).
In recent years, gas tax revenues have flat-lined. But the source of the HTF gap was highway and transit spending getting ahead of revenues, and then staying at elevated levels.
The chart below (from DownsizingGovernment.org/charts) shows real federal highway and transit spending since 1970. Real highway spending (red line) has almost doubled over the last two decades, from $29.1 billion in 1994 to $56.2 billion in 2014. Real transit spending (green line) has also risen since the mid-1990s. (If you visit the /charts page, you can see the dollar values by hovering the mouse over the lines.)
Chris Edwards is the director of tax policy studies at the Cato Institute, and editor of www.DownsizingGovernment.org. Before joining Cato, Edwards was a senior economist on the congressional Joint Economic Committee, a manager with PricewaterhouseCoopers, and an economist with the Tax Foundation.
Be the first to read Chris Edwards’ column. Sign up today and receive Townhall.com delivered each morning to your inbox.
Today, at 11:20 AM PT: Get the Market Movements in Advance; Williams Edge Webinar for September 1st, 2014 | John Ransom
In Other News: Mary Landrieu Connects with Millennials; Lists Parent’s Basement as Louisiana Address | Michael Schaus
Today, at 11:20 AM PT: Get the Market Movements in Advance: William's Edge Webinar for August 28th, 2014 | John Ransom
Today, at 11:20 AM PT: Get the Market Movements in Advance; Williams Edge Webinar for August 27th, 2014 | John Ransom