When House Republicans passed the One Big Beautiful Bill Act (OBBBA) last month, it marked an important step toward enactment of a major tax certainty and spending reform package. While the legislation includes a long list of taxpayer-friendly policies, one of the more underdiscussed provisions includes an historic fix to the broken Highway Trust Fund (HTF) which will begin to rightsize the Fund’s growing deficit problems. As the House and Senate negotiate the entirety of OBBBA, they should retain this important fix to the HTF.
Under the House-passed proposal, Electric Vehicles (EVs) and hybrid vehicles would be subject to a new fee whose revenue would be dedicated to the HTF, which is primarily responsible for building and maintaining America’s highways. The $250 fee on EVs and $100 fee on hybrids is expected to generate about $38 billion over the ten-year budget window, though some estimates peg it higher.
The imposition of this new fee serves a dual purpose: raising revenue for the HTF and restoring fairness. NTU endorses this policy, but believes an ideal alternative would be a Vehicle Miles Traveled fee, which would be a true user fee.
Reforms are desperately needed because the HTF is on the road to insolvency. The Congressional Budget Office projects the HTF becoming insolvent in 2028 and running a cumulative shortfall of $241 billion by 2033. Consistently higher spending levels, due in part to Buy America mandates and expensive Project Labor Agreements, have also contributed to the bleak financial picture of the Fund. The HTF is supposed to be self-sufficient and has required general fund transfers to remain in the black.
At present, HTF revenues are generated primarily through user fees on the sale of gas and diesel fuels, currently levied at 18.4 cents per gallon for gas and 24.4 cents per gallon for diesel fuel. In 2022, taxes on those fuels together generated about $40 billion in revenue, according to the Congressional Budget Office.
However, as gas tax revenues continue to decline due to factors like increased vehicle fuel efficiency and a greater number of electric vehicles, so does funding for the HTF. There is a strong case to be made for EVs and hybrid vehicles contributing to the HTF. Since EVs do not use gasoline, drivers can get a free ride and avoid the gas tax entirely. EV drivers use roads but do not have to pay into the fund that repairs the wear and tear on those same roads. It’s a good deal for EV owners, but not for the rest of taxpayers and drivers who pay into the HTF.
These fees are a step in the right direction, but even stronger structural reforms are needed to fully address the problems with the Trust Fund.
Unfortunately, some conservative House members are seeking the removal of the fees from the bill. While the House Freedom Caucus deserves credit for moving the OBBBA in a more taxpayer-friendly direction, particularly as it relates to clean energy tax credits and Medicaid, it should recognize that removal of this provision would hasten the insolvency of the Trust Fund and continue the inequity that exists between internal combustion engines and electric ones.
The solution presented in the reconciliation bill isn’t perfect, but it is far superior to the status quo. Congress should ensure it remains in the final bill, and work to eventually replace the current funding mechanism with one that is a true user-pays model.