May 2, 2012
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A Proposed Rule to Tighten Fuel Economy Standards Would Gradually Decrease Fuel Consumption, Eventually Reducing Revenues from the Gasoline Tax by 21 Percent in 2040
- The 21 percent reduction in revenues would lower receipts credited to the Highway Trust Fund—the mechanism used to finance the federal government’s surface transportation programs.
- The largest share of the trust fund’s receipts comes from the gasoline tax.
To Illustrate the Effect of a 21 Percent Reduction, CBO Applied That Reduction to the Cash Flows of the Highway Trust Fund Over the 2012–2022 Period
- CBO estimates that such a decrease would result in a $57 billion drop in revenues credited to the trust fund over those 11 years.
- CBO’s analysis, however, is merely illustrative: The full effect of the 21 percent reduction in gasoline tax revenues would not occur for about 30 years because the proposed standards would gradually increase in stringency—boosting the fuel economy of the new-vehicle fleet from 34.1 miles per gallon (mpg) in 2016 to 49.6 mpg by 2025—and because the vehicle fleet changes slowly as older vehicles are replaced with new ones.
The Proposed Rule Would Exacerbate Existing Shortfalls in the Trust Fund
- Although the fund’s balances were stable for many years, its outlays have exceeded receipts for much of the past decade.
- In recent years, the cash shortfall has been covered by transfers from the U.S. Treasury’s general fund.
Policymakers Could Avoid Adding to the Trust Fund’s Shortfall
CBO examined several options, including the following:
- Reducing spending on highways and mass transit,
- Transferring additional money from the Treasury’s general fund to the Highway Trust Fund, and
- Increasing the gasoline tax or raising revenues from other sources to provide receipts to the trust fund.