Reform, and a sales tax, could save Highway Trust Fund, official says

By David Tanner, Land Line associate editor | 1/21/2013

Replacing the federal fuel tax with a sales tax would boost investment and keep the Highway Trust Fund in the black, the outgoing director of a national group of highway officials says.

Executive Director John Horsley shared his thoughts on the issue as he prepares to retire from the American Association of State Highway and Transportation Officials.

Horsley, who will retire Feb. 1, recently told the Transportation Research Board that shoring up the Highway Trust Fund can be accomplished through tax reform rather than a tax increase.

“What is being proposed is that we replace what is currently a cents-per-gallon excise tax on fuels – gasoline and diesel – with a sales tax on fuels. There are about 12 states that do this already,” Horsley told “Land Line Now” following the speech.

“At the federal level, replace the excise tax with a sales tax, and set the rate at levels that restore solvency to the Highway Trust Fund.”

A sales tax would be based on percent, rather than cents per gallon, he said, meaning that if fuel prices increase, the amount paid by road users into the Highway Trust Fund also increases.

For the past few years, the Highway Trust Fund has paid out more than it has taken in, and has required numerous transfers totaling more than $35 billion from general funds to keep it afloat.

The current highway bill funds transportation through October 2014.

“When we get to (October 2014), unless Congress takes action on proposals like I’ve made, the bottom will fall out from under the highway and transit program, and the highway program will have to be cut from $41 billion down to $6 billion, and the transit program from $11 billion down to $3 billion,” Horsley said.

“What we’re putting in front of Congress is they’ve got to restore the solvency to the Highway Trust Fund.”

Horsley’s plan has two parts. The first involves a short-term transfer of $50 billion from federal funds to states – $1 billion to each state – over a six-year period, based on a bill filed by Sen. Ron Wyden, D-OR, and Sen. John Hoeven, R-ND.The second part of the plan is the fuel sales tax.

“The $50 billion proposal is how to stimulate the economy right now using transportation investment over six years,” he said. “The sales tax proposal is how to sustain the solvency of the Highway Trust Fund into the future.”

Horsley says the two-pronged plan could save the national debt $150 billion over the next 10 years. He reiterates the need for reform ahead of a need to increase taxes.

“We are proposing this as tax reform. The Republican leadership says they won’t look at a tax increase, but they would look at tax reform,” he said. “We think this is a major tax reform that could sustain the solvency of the Highway Trust Fund and, probably most importantly, sustain spending on highways and transit, which would save jobs – versus the alternative which would be losing jobs.”

Horsley has led the American Association of State Highway and Transportation Officials, also known as AASHTO, for 14 years. He’ll be succeeded by Frederick “Bud” Wright.

“Land Line Now” Staff Reporter Reed Black contributed to this report. Tune in to “Land Line Now” on Sirius XM 106 to hear his interview with John Horsley, which airs Wednesday, Jan. 23, at 7 p.m. Eastern.

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