Last week, Senator Bob Corker (R-TN) and Senator Chris Murphy (D-CT) announced a plan calling for an increase in federal petrol and diesel taxes to shore up the Highway Trust Fund (HTF) and prevent a potential nationwide road construction work stoppage. According to initial reports, the taxes will generate US$164bn increase in HTF revenues.
Analysis by the Portland Cement Association (PCA), however, reports that the Corker-Murphy proposal would result in nearly US$210bn additional dollars for investment in the nation’s roads and infrastructure, the association said in a statement released yesterday. PCA considered the growth in total vehicle miles travelled (VMT), the composition of travel between diesel users and gasoline users, and fuel efficiency and inflation assumptions.
PCA projects that during a 10-year period, the Corker-Murphy proposal would generate US$209,840,000 for the HTF. It calculated the impact of the gas tax increase, projecting a 2.5 percent growth in VMT 2014-2017 and 0.9 per cent thereafter, and fuel efficiency gains at 1.2 per cent annually. PCA expected inflation to grow two percent annually throughout the forecast horizon.
“PCA’s estimates tend to agree with estimates from the Joint Committee on Taxation (JCT),” said Ed Sullivan, PCA chief economist and group vice president. “JCT estimates that a one-cent increase in taxes on motor fuels would raise about US$1.5bn each year for the trust fund. A 12-cent increase equates to US$18bn and compares to PCA’s 2016 estimate of US$18.7bn.”
According to Sullivan, the difference between JCT estimates and PCA projections is due to assumed increases in VMT between 2014 and 2016.
The Corker-Murphy proposal adheres to funding principles that PCA, through its involvement in the Highway Materials Group, has circulated to lawmakers, including maintaining the integrity of the user-fee based funding mechanism and ensuring long-term stability and solvency of the Highway Trust Fund.