Higher Gas Tax Needed to Restore U.S. Highways, Report Says

(Bloomberg) -- As much as $70 billion annually will be needed over the next two decades to upgrade U.S. interstate highways, far above the $25 billion now being spent, according to a report that proposes raising federal fuel taxes and allowing more tolling to help make up the difference.

The report, commissioned by Congress and released on Thursday, comes as President Donald Trump and Democrats taking control of the House of Representatives in January vow to pursue major public-works legislation in 2019 -- but with no consensus on how to pay for it.

Congress should create a program modeled after the original interstate construction effort and increase U.S. fuel taxes -- currently at 18.4 cents a gallon for gasoline and 24.4 cents for diesel -- while allowing them to increase with inflation, the report by the National Academies of Sciences, Engineering, and Medicine concluded.

The authors didn't recommend an amount, but said the gas tax would have to rise to almost 30 cents a gallon within 10 years, and the diesel levy to about 40 cents, to generate $20 billion annually.

Other recommendations include lifting the current restriction on adding tolls to existing general-purpose interstates, and preparing for new funding and financing mechanisms such as charging motorists per mile traveled as well as accounting for the rise of automated vehicles and climate change.

Read More: New Governors Eye Infrastructure as Trump's Plan Languishes

“We recommend a course of action that is aggressive and ambitious, but by no means novel,” Norman Augustine, the former chairman and chief executive officer of Lockheed Martin Corp., who led the study committee, said in a statement. “Essentially, we need a re-invigoration of the federal and state partnership that produced the Interstate Highway System in the first place.”

The 2015 federal highway bill called for a study of how to upgrade the system, which was authorized under President Dwight Eisenhower in 1956. Most of its segments are decades old, have much heavier traffic than planners expected, and are operating longer without upgrades than they were designed for, the report said.

About $25 billion in federal and state capital funds are spent on the system annually, the study said -- and $45 billion to $70 billion a year over 20 years is needed, depending on estimates of increased traffic.

Funding Absent

The committee said those estimates could be low because they don't include the funding needed for rebuilding or reconfiguring many of the 15,000 interchanges, or to make the system more resilient to extreme weather.

Trump campaigned on a promise to invest more than $1 trillion to upgrade U.S. roads, bridges, and other public works. But the plan his administration released in February lacked a defined funding source, and stalled after a few hearings.

The president and incoming Democratic House leaders have said an infrastructure measure is something they could accomplish on a bipartisan basis in 2019, and Democrats are seeking a significant spending bill in the first six months. But there's still no agreement on how to pay for it.

The Transportation Research Board, which helped produce the report, has started briefing staff of key congressional committees about the findings and could participate in hearings on an infrastructure plan, said Neil Pedersen, the group's executive director.

Earlier: Manufacturers Urge New Congress to ‘Start With Infrastructure'

Business groups including the U.S. Chamber of Commerce and the American Trucking Associations have backed an increase in federal fuel taxes, which haven't been increased since 1993 and have lost purchasing power with inflation and the increased fuel efficiency of vehicles.

Fuel taxes generate 87 percent of revenues for the Highway Trust Fund that pays for projects, but they're a declining source, the report said: by 2020, Congress will have transferred $143.6 billion from general revenues to the fund to help keep it solvent.

While Trump surprised a group of lawmakers in February by saying he would support a 25-cent-per-gallon increase, he never endorsed that publicly, and prominent Republicans flatly rejected any tax increase.

Thursday's report also pointed out that the Republican tax overhaul passed in 2017 could increase the deficit by as much as $1 trillion -- making options such as borrowing and using general fund money to supplement highway funding less feasible.

To contact the reporter on this story: Mark Niquette in Columbus at mniquette@bloomberg.net

To contact the editors responsible for this story: Sara Forden at sforden@bloomberg.net, Ros Krasny, Mark Niquette

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