The 24.4-cent tax on diesel and 18.8-cent levy on gasoline has not been raised for 24 years. (Photo by Sean Kilcarr for Fleet Owner)
David Congdon, CEO of Old Dominion Freight Line (ODFL), said a 20-cent “build America infrastructure fee” added to the per-gallon rack cost of motor fuels could be included in a federal infrastructure bill this year.
“Twenty cents a gallon only represents an annual cost of roughly $80 per motorist to address a $1,400 per motorist problem,” he noted, referring to the projected additional amount a person would pay due to the fee, compared with estimated expenses from congestion and vehicle repairs related to poor road conditions. “To me, that is a good return on investment.”
In an interview with Bloomberg Radio this week, Congdon explained the 20-cent figure would be indexed to fuel economy and inflation. Rack pricing refers to the cost refineries sell to wholesalers and some retailers, and factors in transportation and other costs.
Congdon said the American Trucking Associations (ATA) has held “meaningful discussions” with White House advisors on infrastructure since the group’s visit last month. Congdon, who participated in the visit with Trump, is co-chairman of ATA’s infrastructure task force.
He expressed some optimism an infrastructure plan could take shape by the end of May, and said surface transportation would likely be in line for about one-third of the overall $1 trillion total that has been discussed.
“The cost of underinvestment in our highways and bridges is absolutely huge,” Congdon said, putting the price tag at $100 billion annually for all motorists.
Office of Management and Budget (OMB) Director Mick Mulvaney recently noted that President Trump's full fiscal 2018 budget proposal could include $200 billion for infrastructure.
That number would come "with the understanding that there would be a 5-to-1 sort of leverage ratio on that," Mulvaney explained during a speech at an Institute of International Finance (IIF) event this week.
That ratio means that the private sector would be expected to spend $5 for every $1 spent by the federal government.
Increasing the federal fuel tax at the pump to help foot that infrastructure tab – specifically for highway repair and expansion – has long been among the top strategies trucking leaders, among others.
While always agreeing there is a funding crisis, Congress has resisted raising the 24.4-cent tax on diesel and 18.8-cent levy on gasoline for over two decades; a stance that’s left many industry observers perplexed.
“Lobbyists remain baffled by federal lawmakers' unwillingness to tackle the need for more highway funding, especially in a world where many states have implemented their own fuel tax increases and/or have built toll roads,” noted John Larkin, managing director and head of transportation capital markets research for Stifel Capital Markets, in a recent research update.
“The conventional wisdom suggests that increased fuel taxes are political suicide, even given that the existing fuel tax regimen has not been updated since 1993—even though fuel efficiency has been greatly enhanced and the fuel tax has not been adjusted for inflation over the past 24 years or so,” he said.
“Maybe the lack of action by Congress on updated highway user fees should be the real driver of political suicide,” Larkin added.
This year, however, Congress might actually have an easier time getting behind what is viewed as a fee on refiners, as opposed to a tax on American consumers.
All the way back in 2008, the majority of a special panel created by Congress that included trucking industry representation recommended a large, multi-year hike in fuel taxes, and a longer-term strategic plan on funding alternatives - potentially a vehicle-miles-traveled tax.
But no congressional action resulted from the report, leading many states to begin raising their fuel taxes instead. The latest to act is Tennessee, whose legislature earlier this week approved Gov. Bill Haslam’s road funding plan that includes boosting the diesel tax 10 cents and gas tax by 6 cents.