Federal Highway Infrastructure Funding The Federal Highway Trust Fund (HTF) was designed and passed.

Federal Highway Infrastructure Funding

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The Federal Highway Trust Fund (HTF) was designed and passed
by Congress to set tax rates per gallon of gasoline and diesel consumed by
vehicles using the federal interstate system. The HTF is then used to maintain
the thousands of miles of interstate highway in the United States.

This program has worked successfully up until the last
several years when stricter EPA rules on fuel consumption have been implemented
along with the introduction of hybrid and electric vehicles. Total miles driven
and fuel consumed have decreased and, as such, have resulted in a decrease in
taxes coming into the fund. The federal per-gallon tax rates of 18.4 cents for
gasoline and 24.4 cents for diesel fuel have not changed since 1993. As a
result, HTF is spending more money annually than it is taking in and faces a
funding gap of $107 billion, according to the Congressional Budget Office.
Critics complain that lawmakers have failed to provide an adequate, sustainable
funding source.

With the U.S. interstate highway system in need of major
repairs, the Trump administration is proposing a $1 trillion investment in
improving the quality of the nation’s roads and highways. However, what is not
yet agreed upon is where the additional funding will come from. Three main
ideas have surfaced to generate these funds: (1) the Trump administration is
proposing a public–private partnership plan in which $200 million of federal
spending will spur $800 million in private investment by companies that will
operate the roads and collect road tolls. (2) a gradual increase in the
per-gallon fuel taxes over several years; (3) converting major portions of the
interstate system into toll roads. There has been much debate about these
approaches and many interest groups have voiced their opinions. As of yet, no
decision has been made about this intended infrastructure investment program,
funding level, or its sources of fees.

CASE QUESTIONS

1. Which of the three funding approaches make the best
economic sense? Which one makes the best political sense?

2. What are the pros and cons of each funding approach? Be sure
to include in your discussion the views of personal vehicles versus commercial
vehicles.

3. Is there another funding alternative not yet introduced?
What would it be and how would it be implemented?

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