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STC touts IU’s study proposal as alternative to fuel tax hike

 

 

By TIM ALEXANDER

Illinois Correspondent

 

ANKENY, Iowa — A study examining an alternative to raising the tax on gasoline and diesel fuel to fund repairs to the nation’s surface transportation system is enjoying the support of the Soy Transportation Coalition (STC), among other agricultural interest organizations.

Legislation before Congress calling for a one-time increase in the fuel tax paid by motorists has gathered support from many interest groups, including some soybean organizations, which believe a one-time increase would provide the stimulus states need to commit to road and bridge enhancement projects.

In contrast, the recent soybean checkoff study recommends an immediate 1-cent reduction in the federal gas and diesel tax, followed with an immediate indexing of the gasoline and diesel tax to inflation. According to STC Chair Patrick Knouff, one of the oft-expressed criticisms of the financing approach used to maintain the nation’s roads and bridges is that it is unsustainable.

"The costs of steel, concrete, labor, machinery, et cetera, go up over time, yet our nation and many states rely on a fuel tax that is fixed and does not adjust. As the cost to maintain and improve roads and bridges increases, the country and those states that utilize a fixed cent-per-gallon fuel tax are experiencing funding shortfalls between the needs of the surface transportation system and the revenue to address them," Knouff said.

The study, which was performed by Indiana University’s School of Public and Environmental Affairs, focuses on three key issues: the effect of a 1-cent reduction in gasoline and diesel taxes; the effect of linking the fuel tax to inflation in 2014 in terms of annual fuel tax revenue through 2025; and the amount of additional revenue that could have been generated had the fuel tax been linked to inflation the last time fuel taxes were adjusted.

"My own perspective (is) I think the information is pretty compelling," said Mike Steenhoek, STC executive director, in an email. "In particular I think it’s interesting that annual revenue under the proposal – a 1-cent reduction with indexing – would match the status quo – no adjustment and no indexing – in 2017. In 2019, the cumulative loss of the 1-cent reduction would be fully recovered.

"Therefore, in 2019, federal fuel tax revenues would be in positive territory and increasing with each succeeding year. As a result, the need for policymakers to routinely debate and consider adjusting the fuel tax will be significantly reduced because of the index."

Steenhoek, Knouff and the STC understand it could be a steep hill to climb in convincing transportation stakeholders of the plan’s viability. In addition, the proposal of immediately adjusting the fuel tax to inflation could be a hard sell to policymakers who insist on the inclusion of concessions to the taxpayer in any fuel tax legislation.

For those reasons, the STC is offering the study’s recommendations not as an attempt to rectify all of the nation’s surface transportation infrastructure woes, but as a proposal developed to present a more realistic chance to introduce sustainability to transportation financing, according to Steenhoek.

"The research highlights that, upon implementing this proposal, the initial revenue foregone by the immediate 1-cent reduction can be quickly recovered," he said. "For the nation and the individual states analyzed, it requires four to five years before the cumulative loss of the 1-cent reduction would be fully recovered. Therefore, in four to five years, fuel tax revenues would be in positive territory and increasing with each succeeding year."

Proposals to increase the federal fuel tax to pay for states’ surface transportation upgrades are currently in front of lawmakers, including an amendment to the Preserving America’s Transit and Highways Act (PATH) introduced by U.S. Sen. Tom Carper (D-Del.) June 25. The measure would raise the federal fuel tax to its 1993 level of 30.3 cents per gallon for gas and 36.3 cents for diesel over four years, with the money going to the Highway Trust Fund.

After the Fund is stabilized, Carper’s proposal would provide for an automatic adjustment of the tax based on the Consumer Price Index inflation calculation.

In addition, on June 18 Sens. Chris Murphy (D-Conn.) and Bob Corker (R-Tenn.) unveiled their plan to raise federal gas and diesel taxes over the next two years, followed by inflation indexing. The plan also calls for offsetting the fuel tax increases with other tax cuts or offsets, according to The Associated Press.

The federal Highway Trust Fund is predicted to be depleted by late August, making immediate action to bolster the fund and encourage states to undertake surface transportation repairs a priority for not only agriculture, but all industries and consumers. Failure to act could result in a "transportation crisis," Murphy and Corker noted in a news release.

The Indiana University study examined the effect of the proposal to immediately drop the fuel tax by 1 percent followed with immediate indexing on a federal level, as well as on the 12 STC member states. The study includes the effects of the proposal on Illinois, Indiana, Kentucky, Michigan, Ohio and Tennessee – nearly all of Farm World’s coverage area.

The final results of the soy checkoff-funded study, including graphs and charts, can be viewed at www.soytransportation.org

7/17/2014