AASHTO Journal, 4 December 2015
A study on how to increase revenue to invest in Tennessee’s road network points toward increasing motor fuel taxes as the simplest option, and suggests indexing fuel fees for inflation and vehicle miles traveled to maintain their revenue production.
The study, from the Baker Center for Public Policy at the University of Tennessee, comes as Gov. Bill Haslam and Tennessee Department of Transportation Commissioner John Schroer have been traveling the state to meet with local officials about their road and bridge project needs.
Those officials have been making the case that TDOT will need more funding to maintain the state infrastructure, keep up with highway demand and begin chipping away at project backlog that would cost billions of dollars.
They have not proposed specific revenue measures, but Haslam will soon be drafting his next budget for the legislature to consider.
The UT study covered various revenue-raising options, but said “the simplest and most commonly discussed policy response would be an increase in gasoline and diesel tax rates. The purchasing power of user fee revenues could be sustained through periodic inflation adjustments” plus indexing the rate to changes in vehicle fuel efficiency.
Although news reports have said there is political opposition to hiking fuel taxes, the report noted that the system for collecting fuel tax revenue is already well understood.
The options of simply hiking fuel fees and indexing them, it said, “are especially attractive because they rely on the current system of finance that wholesalers, retailers and consumers are familiar with and they can be implemented quickly with fairly certain results.”
The authors also listed such other options.
Their report said Tennessee could add a sales tax on the price of motor fuel, but that when prices are falling that tax would produce less revenue and some states with such tax systems are moving away from them.
It said a more ambitious path would be to tax drivers for the actual vehicle miles they travel, but that the transition costs to such a system would be high and there is public resistance to VMT taxation over privacy concerns about the technology required to monitor travel.