Finding the Money for Infrastructure Improvements
Where should infrastructure funds originate? Where does it make sense – and where does it not? Now’s the time to think about funds and keeping infrastructure in front of mind.
In my last blog, I wrote about taking a holistic view of the infrastructure so that we focused on the big picture including not only roads and bridges but also airports, rail and marine.
I think there are very few people who would argue against a fully functioning, modernized infrastructure. The issue is how to fund these improvement projects.
I can only speak about funding for the highway and bridge portions of the infrastructure. As most of you know the Highway Trust Fund (HTF) finances most federal spending for highways. It is financed primarily through gasoline and diesel fuel taxes. Another portion of the funds come from sales tax on heavy-duty vehicles, an excise tax on heavy truck tires and an annual use tax on vehicles.
Most of the federal money is parceled out as grants to states and local governments. However, the federal portion is only about one-quarter of the spending on highways. The rest of the funds must come from state and local governments and sometimes the federal portion is tied to states being able to fund projects.
Unfortunately, funds from the HTF have gotten diverted to pay for other projects. The end result is a woeful lack of investment in roads, highways and bridges.
Adding to the funding issue is that as trucks become more efficient and consume less fuel, fleets pay less fuel tax. No one is advocating that we return to the days of fuel-guzzling, black smoke belching trucks, but we need to be aware that less fuel consumption equals less revenue to the HTF.
One other thing to note: the federal fuel tax has not been raised since 1993 and it is not indexed to inflation. Just let that sink in.
Plus, the whole idea of fuel tax goes out the window when we start to talk about electric trucks. Technically there is no fuel in an electric truck so how can it be taxed? I suppose there could be meters at charging stations that measure how much electricity is consumed and some sort of tax structure could be put in place based on that. I am not sure if that is a practical or even workable solution.
One idea that seems to be generating a lot of discussions lately is the vehicle miles traveled tax (VMT). Some states — Oregon, Utah and Washington — are testing it. I assume the way this would be tracked would be via some transponder or other electronic device placed inside a vehicle that would record miles traveled. This, of course, raises privacy issues.
I am not sure what the best answer is for funding transportation-related infrastructure improvements. I do know that one good place to start would be to make sure that funds designated as HTF money actually went into projects that funded highway improvements. That seems pretty simple.
Is the VMT tax the answer? I don’t know. However, I do know that we all need to start thinking of funding options that make sense for the new reality of trucking because if we don’t figure out some way to improve the conditions of our roads, highways and bridges now, it will become an even bigger problem in the future. We’ve put this off for far too long. Now is the time to fix this problem once and for all.
At Corcentric, we stand ready to help any fleet bridge that gap. Now, more than ever, it’s crucial to make the right lease-versus-buy choice – those who do are more likely to emerge from the COVID crisis as industry champions positioned for growth. To learn how we can help, contact Corcentric today.