Greater Fuel Economy Means Less Money for Highway Projects; Tax Hike Proposed

By Susan Jones | February 18, 2014 | 10:26 AM EST

(AP File Photo)

( - President Barack Obama on Tuesday plans to order new fuel-economy standards for trucks, part of his "year of action" push on "climate change."

But greater fuel economy means less funding for the diminished Highway Trust Fund, which pays for road and mass transit projects by collecting "user fees" -- mainly excise taxes on gasoline and diesel fuel.

Obama's fuel-economy announcement comes a week after a Senate panel heard testimony on maintaining the federal Highway Trust Fund, which is projected to run out of money as early as this September -- partly because higher fuel economy standards have reduced gasoline consumption, which in turn has reduced the revenue that flows into the trust fund.

At the Feb. 12 hearing, U.S. Chamber of Commerce President Tom Donohue told the Senate Environment and Public Works Committee it's time to increase the federal 18.4-cents-a-gallon tax on gasoline and the 24.4-cents-a-gallon tax on diesel, neither of which has been raised since 1993.

That drew a response from Sen. Jeff Sessions (R-Ala.): Instead of raising taxes, the senator asked Donohue, would it be acceptable to reduce wasteful spending, and use those savings to pay for transit projects?

"If you actually got the money," Donohue responded. "The longest sing-song in Washington in the history of my time here was waste, fraud, and abuse; and we're going to get rid of it and use the money, but the money never shows up. But if you actually got the money -- took it out of other budgets and put it there, I'd applaud you."

Sen. Sessions suggested raising corporate taxes, but Donohue said those taxes are already too high.

"So, I guess I understand what you want to say," Sessions told Donohue. "The Chamber of Commerce is testifying that you don't believe it's possible to cut spending and save the highway program without raising taxes..."

Donohue said he thinks it would be "very, very hard" to come up with the necessary savings in the next seven months, when the Highway Trust Fund will be depleted. "But if you can do it, I'll vigorously support it," Donohue said.

"Well, good, I think that's what we should do. And there are places we can save money," Sessions said.

The senator added that he was "just teasing" Donohue when he suggested raising the corporate tax rate. "It is hurting America," Sessions said.

President Obama on Tuesday will direct the EPA and the Transportation Department to issue a new round of fuel-efficiency standards for medium- and heavy-duty vehicles by March 2016.

This second round of fuel economy standards will save vehicle owners an estimated $50 billion in fuel costs and save a projected 530 million barrels of oil, according to the White House.

"Increasing the efficiency of medium-and heavy-duty vehicles is a key component of the President’s Climate Action Plan to reduce carbon emissions," said a White House fact sheet.

That fact sheet notes that while the United States "will continue to rely on responsibly produced oil and natural gas, President Obama is committed to a long-term policy that allows us to transition to cleaner energy sources."