Higher MPG rules will reduce road repair funds

Higher MPG rules will reduce road repair funds

Rising MPG standards will cut gas tax revenue by $57 billion through 2025, which in turn will cut the Highway Trust Fund 13 percent, the Congressional Budget Office (CBO) said in a report released Wednesday of this week. The $57 billion reduction would mean $48 billion less to fix roads and $9 billion less for mass transit spending, the report concluded.

The Obama administration and 13 major automakers agreed in July of 2010 to hike fuel standards to 54.5 mpg between 2017 and 2025, though the final standards are not expected to be announced until this summer.

If the standards remain at 54.5 mpg, the CBO estimates that by 2040, the new rules will reduce the nation’s gas tax revenue 21 percent annually. It suggests that a 5 cent per gallon gas tax increase would be necessary to offset the reduction in revenue. The estimate includes a small reduction in fuel use attributable to the higher fuel tax. The CBO also said the government should consider a tax on miles traveled.

Gloria Bergquist, spokeswoman for the Alliance of Automobile Manufacturers, which represents a dozen automakers, including those from Detroit, said the study showed the new rules have costs. “There are always policy trade-offs for CAFE standards and adding more technology hurts affordability, she said. Smaller cars raise safety concerns and gas-sipping vehicles take revenues out of federal and state coffers, which is why we need a balance such that we have maximum fuel economy without adverse effects on revenues.”

The rules are predicted to cost the auto industry $157.3 billion, the Obama administration says, while saving drivers $1.7 trillion at the pump, including the 2012-16 mileage increases that were finalized in 2010.