U.S. House Leader Proposes Large Fuel Tax Increases

Representative Bill Shuster (R. Pa.), Chairman of the House Transportation Committee, on 20 July 2018 released a wide-ranging discussion draft proposing to overhaul the federal Highway Trust Fund, including hikes in the current tax rates for gasoline and diesel fuel. 

The U.S. federal Highway Trust Fund is the mechanism by which the government raises funds for highways and other necessary transportation infrastructure, and it is funded primarily by taxes on motor fuels. The current tax of 18.3 cents per gallon for gasoline and 24.3 cents for diesel fuel was last raised in 1993. 

Due to a number of factors, including increased vehicle fuel efficiency and much higher construction costs, the amounts raised by the current tax have been woefully insufficient to fund the Trust Fund for many years. This problem is likely to be exacerbated by the increased use of electric vehicles.

Rep. Shuster proposes the formation of a Highway Trust Fund Commission that would be charged with recommending to Congress long-term solutions to the problems. The Commission’s recommended legislation would be submitted for an expedited up or down vote by Congress with no amendments.

Shuster also proposes that the federal government undertake a pilot program to evaluate shifting from a per-gallon fuel tax to a per-mile user fee based not on consumption, but on miles driven.  Similar test programs have been done in several states in recent years, including Oregon and Colorado. This shift would address the problem presented by higher miles-per-gallon fuel efficiency, and the advent of electric vehicles. The proposal would also impose a 10% user fee on the wholesale price of electric batteries used to propel motor vehicles.

To provide increased funding while these other proposals are being evaluated, Shuster would temporarily increase the gasoline tax by 15 cents per gallon, to 33.3 cents, and the diesel tax by 20 cents to 44.3 cents per gallon. These increases would be phased in over three years, would then be indexed for inflation, and would expire in 2028. According the Joint Committee on Taxation, the gasoline tax increase would raise $194.4 billion over ten years, and the diesel tax increase would raise $85.7 billion.

Although it is unlikely that Shuster’s proposal will be enacted in full during this year’s Congress, it will provide a base for Transportation Committee hearings and other activities related to the Highway Trust Fund, which expires periodically and must be renewed. 

Related: U.S. Senate Holds Hearing on CFPB and Ex-Im Bank Nominees

How This Impacts Mobility

Fuel costs are a major cost involved in the movement of household goods and other expenses related to the relocation of employees. The Shuster proposal would significantly raise those costs. Although a hike in fuel taxes is long overdue according to most transportation industry sources, companies will need to plan for the increased costs if the proposal is accepted.

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