Fleet Management

Analysis: Raising Federal Fuel Tax Makes Economic Sense

The trucking industry can’t afford not to pay fuel taxes to fund needed road projects Analysis by Business Contributing Editor Evan Lockridge.

April 2018, TruckingInfo.com - Editorial

by Evan Lockridge, Business Contributing Editor - Also by this author

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Infrastructure funding is one of the key legislative issues for the trucking industry in 2018. Photo: U.S. DOT
Infrastructure funding is one of the key legislative issues for the trucking industry in 2018. Photo: U.S. DOT

There is a lot of talk lately about increasing the amount of spending on the nation’s infrastructure, especially for roads and bridges. Report after report details why this needs to be done – because our roads and bridges are crumbling and too congested, and there is not enough money to pay for improvements.

How to pay for it, however, is another question. Some in trucking, such as the American Trucking Associations, are calling for an increase in the fuel tax. Of course, there are opponents to this, even in trucking, an industry that relies on roads and bridges like no other. However, the simple fact is that trucking can’t afford not to pay fuel taxes for road projects.

The Infrastructure Funding Plan

To begin with, a little background: More than $1.5 trillion in infrastructure funding has been called for by the Trump administration, while the American Society of Civil Engineers says $2 trillion is needed over the next 10 years just for roads – well short of current funding levels. 

Also, the way we pay for federally funded road and bridge projects hasn’t changed over the past 25 years. Yep, the nation’s gas tax is still 18.4 cents per gallon and diesel is at 24.4 cents per gallon. And like everything else in this world, from healthcare and groceries to new vehicles, (whether four wheels or 18), the cost of building and repairing roads and bridges isn’t as cheap as it was in 1993.

The state of the nation’s roads also is costing trucking a lot in terms of traffic congestion. An American Transportation Research Institute study found traffic congestion added up to an increase of more than $22,000 in operational costs for each truck that travels 100,000 miles annually. For the entire trucking industry, that’s $63.4 billion in additional operational costs.

Funding Through Fuel Taxes

One plan that’s been floated is to gradually increase the fuel tax by 20 cents per gallon, to raise $340 billion over the next 10 years. Unfortunately, that’s not enough. Fifty cents per gallon, on the other hand, would take that figure to $850 billion over a decade, and that’s much closer to the amount of money that’s needed.

Opponents say trucking can’t afford such a hike. Yet diesel prices have increased by far greater amounts in just a matter of months and the wheels of the trucking industry kept turning. And no one’s calling to increase the fuel tax by that much all at once.

In fact, this might be a perfect time for fleets to absorb a fuel tax increase. Economists both inside and outside of the trucking industry are upbeat on the general condition of trucking and what’s expected to come the remainder of this year.

Many trucking operations had a stellar 2017. In addition to seeing healthy business levels, they got a hell of a holiday bonus in terms of tax reform, which pushed their profits much higher – and they will continue to enjoy its financial benefits.

Now is the Time to Invest

The bottom line is we have a healthy economy and good freight demand (some would argue the latter is among the best ever), so it’s not a bad time to deal with a fuel tax increase. At the same time, trucking is plagued by delays in terms of congested highways that’s costing billions of dollars and cutting into capacity to haul all that freight.

Economists are more mixed on the effects of infrastructure spending on the economy as a whole. But if we were to use a fuel tax to pay for it, rather than deficit spending, it could help avoid potential problems. Some economists are concerned that deficit spending, even if it spurs economic growth in the short run, may also cause an uptick in inflation, pushing the Federal Reserve to raise interest rates faster – potentially causing the economy to slow and making money more expensive to borrow.

You can’t tell me with a straight face that now isn’t a good time to invest in the nation’s roads and bridges, and that it doesn’t make economic sense. Unless of course you like paying for congestion and think a dollar today goes as far as it did more than two decades ago, which was the last time federal fuel taxes were increased.

Comments

  1. 1. MC [ April 04, 2018 @ 05:07AM ]

    A fuel tax may be a good idea in the short term, but not so much in the long run. With the popularity of alternative fuel, hybrids and plug-in electric vehicles on the rise, another form of revenue needs to thought up in a hurry as the demand for gasoline and diesel fuels drop.
    I don't have the answer, just a few ideas to save a few bucks elsewhere that could be moved to infrastructure. Now is the time to re-evaluate government spending. Renegotiate or tear up contracts on failed projects (like the F35), amend laws that cost us billions (like the law forbidding Medicare from negotiating drug pricing), put caps on college tuition costs for any school accepting government money (including student loans), just to name a few ideas. The money is there, we just need competent people (who don't put their own greed and self-interests ahead of the greater good) to control the purse strings.

  2. 2. Steph Sabo [ April 04, 2018 @ 06:07AM ]

    I do not believe in raising taxes will solve the problem. I do believe the government needs to re-evaluate their spending habits in a bad way. Throwing money at a problem does not always mean its a fix. I firmly believe the government does so much wasteful spending, that the revenue stream is adequate as needed.

  3. 3. Larry Wagoner [ April 04, 2018 @ 07:25AM ]

    Raising the fuel tax will help if not done drastically. Now there is immediate demand due to the infrastructure being put front and center by President Trump.
    Everyone is jumping on the band wagon for Tesla trucks. Good, but what about the lack of funding by these electric vehicles for their use on the highway. No body thinks twice about all the electric vehicles not paying their share of the road tax. When will that be addressed? What will happen to the road tax revenue when and if thirty percent of all vehicles are electric. I think this situation should be addressed too.

  4. 4. Ron Collyer [ April 04, 2018 @ 07:41AM ]

    What really happens if the tax is raised? It gets passed down,trucking companies raise the rates, stores raise prices and the consumer ends up footing the bill. It is bad enough we have to put up with crazy swings in the oil market already, adding another cost only makes it worse. We need better management of existing funds and doing away with Davis -Bacon.

  5. 5. Gerald [ April 04, 2018 @ 10:01AM ]

    I agree with MC, Steph and Ron.

    No country has ever taxed their way to prosperity.

  6. 6. Bill McGregor [ April 04, 2018 @ 12:41PM ]

    I agree with tax IF the money is spent solely on highways and not bike paths, etc. Also reducing the studies that re required to be done to work on a highway or bridge needs to be reduced. I have seen "environmental studies" that cost millions that really do not do anything but increase the cost of a project. Streamlining the planning and construction of a project needs to be done. There is no reason for a project to take over 2 years to complete - beginning to end.

  7. 7. Richard [ April 04, 2018 @ 02:00PM ]

    Yes, that what's needed to be done to pay for the roads. Raise the taxes up on trucks even higher. Trucks pay more taxes than the four-wheeler's now. Yet they don't get to use the full road. They are restricted to certain lanes and that is getting worse. Pay-even more taxes on something you can't use. That sounds fair. Why not just add 1 dollar a gallon tax to gas and diesel. I bet that still wouldn't be enough. No-amount will ever be enough, with this Government.

  8. 8. L.D. [ April 04, 2018 @ 04:25PM ]

    When raising any kind of taxes, I think we should conduct fiscal and performance audits first, you can find where a lot of the pesos are being siphoned off for mass transit, bike paths, the mating habits of the dung beetle while intoxicated, where elephants go to die, fixing potholes in sanctuary cities, you know, all this petty stuff

 

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