Reference no: EM132284138

Federal Highway Infrastructure Funding The Federal Highway Trust Fund was designed and passed by Congress to set tax rates per gallon of gasoline and diesel consumed by vehicles using the federal interstate system. The fund is then used to maintain the thousands of miles of interstate highway in the United States. This program has worked successfully up until the last several years when stricter EPA rules on fuel consumption have been implemented along with the introduction of hybrid and electric vehicles. Total miles driven and fuel consumed have decreased and, as such, have resulted in a decrease in taxes coming into the fund. The per-gallon tax rates have not changed since 1993, and the fund is expected to run out of money by the end of this year. With the U.S. interstate highway system in need of major repairs, the federal government is attempting to put together a multi-billion dollar, multi-year funding bill that will address these maintenance needs. However, what is not yet agreed upon is where the additional funding will come from. Three main ideas have surfaced to generate these funds: (1) a gradual increase in the per-gallon fuel taxes over several years; (2) indexing the fuel tax to inflation; and (3) tolling major portions of the interstate system. There has been much debate in Congress about these approaches and many interest groups have voiced their opinions. As of yet, no decision has been made about the funding level and its sources

Coyle, John J.; Novack, Robert A.; Gibson, Brian; Bardi, Edward J.. Transportation: A Global Supply Chain Perspective (Page 98). Cengage Learning. Kindle Edition.

1. Which of the three approaches make the best economic sense? Which one makes the best political sense?

2. What are the pros and cons of each approach? Be sure to include in your discussion the views of personal vehicles versus commercial vehicles.

3. Is there another alternative not yet introduced? What would it be and how would it be implemented?