Reconsidering the Challenges of Earmarked Taxes for Highways

Abstract

A prominent theme in US federal infrastructure policy is the near-term insolvency of the Highway Trust Fund (HTF), the dedicated fnancing stream for highways and public transit. The HTF is projected to exhaust its reserves by 2022 and require more than $170 billion in cumulative general revenue transfers by 2029, leading to widespread funding uncertainty for nationally-signifcant surface transportation infrastructure and a dramatic increase in the national debt. This paper examines three countries—Japan, England, and Australia—that chose to eliminate earmarked taxes for highways and examines whether their infrastructure benefted as a result. International outcomes were mixed as to whether federal investments in highways and road quality remained robust following the intervention. But such a solution, with stringent safeguards, could provide an answer to the HTF solvency issue in upcoming surface transportation reauthorization legislation.