Fuel Economy Rules Could Cut Tax Revenue $57 Billion

The Congressional Budget Office says meeting proposed U.S. rules to double the average fuel economy of new vehicles by 2050 would cut revenue from fuel taxes 13% or $57 billion, between now and 2022.

The loss would continue to grow through 2040 as new vehicles replace older, less fuel-efficient models, the CBO adds. By then, it says, revenue would be 21% lower than if average fuel economy rules stayed at current levels.

The U.S. Environmental Protection Agency has estimated that meeting the proposed target of an average 49.6 miles per gallon by 2025 would reduce annual gasoline consumption in the U.S. nearly 26% to 119 billion gallons.

Gasoline taxes generate about 60% of the financing for the Highway Trust Fund, which spends 85% of its money on highway projects and 15% on mass transit programs. The CBO predicts that the fund, which has run dry three times since 2008, will do so again by October 2013. It also says that, barring new sources of revenue, the fund's spending will exceed its income by a cumulative $147 billion by 2022.

Congress could offset the shortfall by directing a bigger chunk of the Treasury Dept.'s general funds into the Highway Trust Fund as it has done previously. Or it could find another source of revenue. One option: Raise the federal tax on gasoline which has been fixed at 18.4 cents per gallon for 19 years by about 5 cents per gallon, the CBO notes. But that, analysts say, is a step neither political party wants to take.