Federal Highway Trust Fund (United States)
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The United States Highway Trust Fund is a transportation fund with three accounts - the bulk composed by the 'Highway Fund', a smaller Mass Transit Account and a comparatively small Leaking Underground Storage Tank Trust Fund. Lawmakers established it in 1956 to ensure dependable financing for maintenance of the United States Interstate Highway System and certain other roads. Money in the fund is raised indirectly via a federal fuel tax of 18.3 cents per gallon on gasoline and 24.3 cents per gallon of diesel fuel and related excise taxes.
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[edit] History
The Highway Trust Fund (HTF) was founded by the 1956 Highway Revenue Act. Prior to the HTF, funds were directed from the General Fund of the U.S. Treasury. Originally, the fund was dedicated solely to highways. Yet, the Highway Revenue Act of 1982 mandated a separate account to support mass transit. Effective April 1, 1983, a Mass Transit Account was created to receive a portion of the motor fuel taxes and receives about 2.86 cents per gallon of gas.
[edit] The HTF and fuel taxes
The Highway Revenue Act mandated a three cent tax, increased to four cents in the late 1950s and the tax held steady at that level until the passage of the Surface Transportation Assistance Act in 1982. After President Ronald Reagan approved the act on January 6, 1983, the tax was increased to nine cents and mandated the establishment of the Mass Transit Account, splitting the tax with 8 cents going to the Highway Fund and one cent going to the Mass Transit Account.
Politicians later seized on fuel taxes as an area where taxes could be collected for deficit reduction. On November 5, 1990, in an effort to reduce the deficit, President George H. W. Bush approved the Omnibus Budget Reconciliation Act of 1990, which increased the gas tax another five cents - half going to the Highway Fund and half going to deficit reduction. President Clinton increased the gas tax by 4.3 cents when he signed the Omnibus Budget Reconciliation Act of 1993 on August 10, 1993. The total tax to 18.4 cents per gallon. However, the Taxpayer Relief Act of 1997 redirected the 4.3 cent hike to the HTF.
The general motor fuel tax still stands at 18.4 cents; however the Senate Committee on Commerce, Science and Transportation, formed in 2005 discussed raising the federal gas tax to 40 cents per gallon over five years. In its current form, the tax would be raised 5-8 cents annually for five years, then be indexed to inflation. [1]
The federal tax on motor fuels yielded $28.2 billion in 2006.[2]
[edit] Challenges to the fuel tax
Politicians have occasionally threatened to suspend the taxes that support the HTF. According to the Wall Street Journal, "Since 2000, there have been at least half a dozen attempts by individual members of Congress to suspend the federal gas tax, which raises money to repair and expand the highway system. All have failed." [3]
The fuel tax became a prominent issue in April 2008 during the 2008 presidential election when Senator John McCain first proposed a 'gas holiday'- a suspension in the tax during the peak driving season in summer - and Senator Hillary Clinton did soon after in late April 2008. Senator Barack Obama opposed the suspension in fuel taxes. According to The New York Times, Clinton proposed a 'windfall tax' on oil companies, which "would cover all of the lost revenue from the federal tax on gasoline and diesel fuel. She also said no highway projects would suffer."[2]
[edit] Methods of Finance
Tax revenues directed to the HTF are derived from excise taxes on highway motor fuel and truck related taxes on truck tires, sales of trucks and trailers, and heavy vehicle use.
The Highway Trust Fund is unique in that it is funded by the users, namely those who travel on the highways. It is modeled on the Social Security Trust Fund, where money goes to the general treasury but is credited to the fund. In the original Highway Revenue Act, the crediting of user taxes to the HTF was set to expire at the end of fiscal year 1972.
The fund has been projected to run out in 2009.[4]
[edit] Notes
- ^ "Ahead of the Bell: Transportation funding", cnn.com, April 22, 2008. Retrieved on 2008-04-23.
- ^ a b Broder, John M.. "Democrats Divided Over Gas Tax Break", The New York Times, April 29, 2008. Retrieved on 08-05-01.
- ^ Power, Stephen. "McCain’s Gas-Tax Plan May Be a Clunker", Wall Street Journal / Washington Wire, April 15, 2008. Retrieved on 08-04-16.
- ^ Schoen, John W.. "U.S. highway system badly in need of repair", MSNBC, August 3, 2007. Retrieved on 08-04-16.
[edit] External links
- Financing the Federal Highway Trust, by the Federal Highway Administration
- Federal Highway Administration "Primer" on the FHT (pdf)
- What is the Highway Trust Fund?
- When did the Federal Government begin collecting the gas tax?
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