Highway Trust Fund: Where Does The Money Go?

The Highway Trust Fund (HTF) is a transportation fund in the United States that was established in 1956 to finance the construction of the interstate highway system. The fund has two accounts: the Highway Account, which supports road construction and other surface transportation projects, and the Mass Transit Account, which funds mass transit. The HTF is financed by transportation-related excise taxes, primarily federal taxes on gasoline and diesel fuel, and has also received transfers from the general fund to remain solvent.

Federal fuel taxes

The federal fuel tax on motor fuels yielded $28.2 billion in 2006. The Congressional Budget Office (CBO) estimates that HTF tax revenue from federal excise taxes on gasoline and diesel fuel will total $35.8 billion in fiscal year 2023. This revenue accounts for 83% of the HTF's total revenue. The remaining revenue comes from taxes on heavy trucks and tires, and interest earned on reserves.

The federal fuel taxes are typically paid by oil companies when fuel is removed from the refinery or the tank farm. These taxes are ultimately passed on to the highway user and become part of the price of fuel. The taxes are first deposited into the general fund of the Treasury and then transferred to the HTF.

The HTF has two main accounts: the Highway Account and the Mass Transit Account. The Highway Account funds road construction and other surface transportation projects, while the Mass Transit Account supports public transportation systems such as buses, railways, and subways. The Mass Transit Account was created in 1982 and received 20% of the motor fuels tax increase that year.

The HTF was established in 1956 to provide a dedicated source of funding for the construction and maintenance of the interstate highway system. It has played a crucial role in financing many infrastructure projects, with the federal government contributing $52 billion in highway investment in 2022. However, the HTF has faced funding shortfalls in recent years due to decreasing fuel consumption and rising construction costs. To address these shortfalls, Congress has transferred funds from the general fund of the Treasury to the HTF on multiple occasions.

Sales tax on tractors and heavy trucks

The Highway Trust Fund (HTF) is a transportation fund in the United States that was established in 1956 to finance the construction and maintenance of the country's interstate highway system. The fund has two accounts: the Highway Account and the Mass Transit Account. The Highway Account primarily funds road construction and other surface transportation projects, while the Mass Transit Account supports public transport systems such as buses, railways, subways, and ferries.

The HTF is financed through various transportation-related excise taxes, with the majority of its revenue coming from federal taxes on gasoline and diesel fuel. However, in recent years, the fund has also relied on significant transfers of general revenues to remain solvent. In addition to fuel taxes, the HTF also generates revenue from a sales tax on tractors and heavy trucks, an excise tax on tires for heavy vehicles, and an annual use tax on those vehicles.

The sales tax on tractors and heavy trucks is levied on the sale of certain new heavy-duty trucks. This tax is designed to target heavy truck users and contribute to the funding of highway and surface transportation projects. The specific tax rate for the sale of tractors and heavy trucks is 12% of the retailer's sales price for tractors and trucks over 33,000 pounds gross vehicle weight (GVW) and trailers over 26,000 pounds GVW. This tax is paid by the retailer at the time of the sale.

The revenue generated from the sales tax on tractors and heavy trucks is crucial for the HTF as it helps to ensure the fund has sufficient resources to support various transportation projects. By including this tax, the HTF can address the funding gap caused by the recurring shortfalls in fuel tax revenue. The combination of fuel taxes and the sales tax on tractors and heavy trucks allows the HTF to maintain its financial stability and continue investing in the country's transportation infrastructure.

Overall, the sales tax on tractors and heavy trucks plays a significant role in the financing of the Highway Trust Fund. It provides additional revenue to support the construction and maintenance of highways and surface transportation projects, ensuring that the fund can meet its financial obligations and continue to improve the country's transportation network.

Excise tax on tires for heavy vehicles

The Highway Trust Fund was established in 1956 to finance the United States Interstate Highway System and certain other roads. The fund is comprised of two accounts: the Highway Account and the Mass Transit Account. The Highway Trust Fund is financed by transportation-related excise taxes, including federal taxes on gasoline and diesel fuel, excise taxes on tires for heavy vehicles, and an annual use tax on those vehicles.

The excise tax on tires for heavy vehicles was first levied in 1918 due to revenue needs brought about by World War I. The tax was reduced after the war and repealed in 1926. However, it was reintroduced during the Great Depression and increased to help finance World War II. The tax was again reduced before the Korean War but was ultimately kept in place due to revenue needs. In 1956, the rate of the tax was raised in response to legislation enacted to build the interstate highway system and to create the Highway Trust Fund.

The excise tax on tires is based on the load capacity of the tire, with a higher tax rate for tires with greater load capacities. Tires with a load capacity of 3,500 pounds or less are exempt from the tax. The rationale behind the excise tax on tires is that heavier vehicles cause greater damage to roadways and bridges, and the tax serves as a proxy for highway wear-and-tear charges. While the tax has been criticised for discriminating against the trucking industry and burdening lower-income individuals, it is considered easy to administer with minimal collection costs.

The excise tax on tires for heavy vehicles is an important source of revenue for the Highway Trust Fund, contributing to the construction and maintenance of highways and bridges. The fund plays a crucial role in facilitating infrastructure projects, with the federal government contributing billions of dollars in highway investment. While the fund has faced recurring funding shortfalls, the excise tax on tires for heavy vehicles remains a significant component of its revenue stream.

Annual use tax on heavy vehicles

The Highway Trust Fund (HTF) was established in 1956 to provide funding for the construction of the interstate highway system in the United States. The fund has two accounts: the Highway Account and the Mass Transit Account. The Highway Account is primarily used for road construction and other surface transportation projects, while the Mass Transit Account supports public transportation systems such as buses, railways, and subways.

One of the sources of revenue for the HTF is the annual use tax on heavy vehicles, often referred to as the Heavy Vehicle Use Tax (HVUT). This tax is assessed on heavy vehicles operating on public highways with a gross weight of 55,000 pounds or more. The gross weight of a vehicle includes the unloaded weight of the vehicle and any trailers, as well as the weight of the maximum load carried. For vehicles with a gross weight between 55,000 and 75,000 pounds, the HVUT is $100 plus $22 per 1,000 pounds over 55,000 pounds. The maximum HVUT is $550 per year for vehicles weighing over 75,000 pounds. Certain groups, such as government agencies, nonprofit organizations, and mass transportation authorities, are exempt from the HVUT. Additionally, vehicles that travel less than a certain number of miles annually, including commercial and agricultural vehicles, are also exempt.

The HVUT is an important component of the HTF's revenue stream, along with excise taxes on motor fuel (gas tax), tires, and heavy trucks. However, the HTF has faced recurring funding shortfalls due to rising construction costs, aging infrastructure, and decreasing fuel consumption. To address these shortfalls, transfers from the Treasury's general fund have been made since 2008, totalling $275 billion, including $118 billion from the Infrastructure Investment and Jobs Act in 2021.

Despite these transfers, the HTF continues to face financial challenges, and there is a projected cumulative shortfall of $280 billion by 2034. To address this issue, lawmakers are considering various options, including increasing the gas tax, raising revenue through alternative sources, or reducing spending to align with existing revenues.

Interest on invested balances

The Highway Trust Fund (HTF) was established in 1956 to provide a more dependable source of funding for the construction of the interstate highway system. The HTF is comprised of two accounts: the Highway Account and the Mass Transit Account. The HTF receives money from a federal fuel tax of 18.4 cents per gallon on gasoline and 24.4 cents per gallon of diesel fuel, as well as related excise taxes. In addition to dedicated tax revenue, the HTF also receives a small amount of interest on invested balances.

The Highway Account funds road construction and other surface transportation projects, while the Mass Transit Account supports mass transit. The federal government accounts for about one-quarter of all public spending on roads and highways, with the remaining three-quarters financed by state and local governments. Most spending from the HTF for highway and mass transit programs is through federal grants to state and local governments.

The Congressional Budget Office (CBO) estimates that Highway Trust Fund tax revenue will total $43 billion in fiscal year 2023. Revenue from the federal excise tax on gasoline and diesel fuel accounts for 83% of the total. The remaining trust fund tax revenue comes from a sales tax on tractors and heavy trucks, an excise tax on tires for heavy vehicles, and an annual use tax on those vehicles.

In addition to tax revenue, the HTF also receives a small amount of interest on invested balances. This interest is earned on the balances maintained by eligible institutions in master accounts at Federal Reserve Banks. The interest rate is set by the Board of Governors of the Federal Reserve System and is an important tool for the conduct of monetary policy.

The HTF faces recurring and increasingly large funding shortfalls due to an imbalance between revenues and spending. To address these shortfalls, transfers have been made from the Treasury's general fund. However, these transfers do not bring in any new federal revenues, but simply allow spending from the fund to continue.

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