Federal Highway Fund Under Same Pressures as Maryland’s TTF

The Federal Highway Trust Fund is facing similar budgetary pressures as Maryland’s Transportation Trust Fund, forcing officials to look at new models in an increasingly EV world.  

The Federal Highway Trust Fund (HTF) and Maryland’s Transportation Trust Fund (TTF) receive the vast majority of their revenue from taxes on fossil fuels. For decades, this model successfully supported the expansion and maintenance of the nation’s highway infrastructure, mainly due to the supremacy of fossil fuels. But climate change and the transition toward electrification are eliminating the largest source of roadway finding. In Maryland, the Governor & General Assembly formed the TRAIN commission to examine new revenue models. In Washington, DC, federal officials are also looking at ways to keep the HTF financed well into the future.

The federal government imposes an 18.4 cents per gallon tax on gasoline, last raised three decades ago in 1993. If pegged to inflation (a model that Maryland has already adopted), the tax would be roughly 40 cents – more than double its current amount. The Congressional Budget Office projects that the current gas tax brings in approximately $37 billion but spends roughly $65 billion, with spending significantly outpacing revenue. Without significant changes to either revenues or expenditures, the HTF is projected to run out of money somewhere in 2028. For states and counties, the HTF running to zero would mean significant delays in receiving federal transportation dollars.

States have been experimenting with several tools to make up the revenue difference in their transportation programs. These include tying gas taxes to inflation, higher registration fees for electric vehicles, and excise taxes on electricity sold at EV charges. Last week, federal officials focused on two models from the Oregon and Washington state, specifically taxes on mileage. Neither state has fully implemented a tax on mileage model, with much more work remaining. A major deciding factor in the federal government’s ultimate decision may lie in what most states decide to adopt and to graft a program on top of the most favored tax model.

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