Funding Future Surface Transportation System

 

The Issue
The current U.S. surface transportation system infrastructure, currently funded by federal, state and local governments, has been underfunded and remains in desperate need of modernization.

Why It Matters

Decision makers seek alternative forms of funding for the U.S. surface transportation system. Some of these methods will affect U.S. soybean farmers more than others. This study examines how various solutions of funding could affect agriculture and specifically U.S. soybean farmers and the rest of the U.S. soy industry.

Issue Summary
A checkoff-funded study Funding Future Surface Transportation System: The Impact on Agriculture discusses the problems and future concerns for funding improvement and maintenance of the U.S. surface transportation system and specifically the potential effect on U.S. agriculture. The report also examines potential sources of funding, such as increasing diesel and gasoline taxes, increasing taxes on crude oil, using more tolls or taxing various shipping methods, and describes how these avenues could impact U.S. agriculture and the U.S. soy industry.

Critical Facts
The competitiveness of U.S. soybeans will depend even more on the efficiency of the U.S. transportation system in the future. U.S. competitors continue to invest more in their transportation infrastructure while the United States seems to fall further behind, mostly due to lack of sufficient funding. U.S. soybeans take several modes of transport from field to user (truck, rail, barge, ship) but trucks remain the dominant method. The U.S. highway system receives funding from a mix of local, state and federal funds, but the majority of funding comes from federal highway legislation. The legislation officially expired in 2009 but continues on a series of short-term extensions.

The study determined that a $134 billion funding gap, using 2008 dollars, remains to just maintain the U.S. highway system, with a $262 billion funding gap to improve the system. This study examines eight different options for funding the maintenance and improvement of the U.S. surface transportation system.

Taxes on gasoline and diesel fuel haven’t been increased since 1993. These taxes currently represent 90 percent of funding for the U.S. highway system. An estimated 4.2 cents per gallon would be needed to fill the gap to just maintain the system. This would increase taxes to 22.6 cents per gallon of gasoline and 28.6 cents per gallon of diesel fuel. To improve the U.S. highway system, an increase of 8.2 cents per gallon would be required. This system of funding would have the least dramatic effect on the U.S. soybean industry, compared with other alternative suggestions of funding.

A fixed fee per mile or variable fee based on the road distance would be known as Vehicle Miles Travel (VMT) fees and could be another solution to funding. This would require a .2-cent-per-mile fee to maintain or a 4.41-cents to a 4.9-cents-per-mile fee to improve the U.S. surface transportation system. Another alternative form of funding that could take a toll on the agricultural sector would be the increase of taxes on heavy vehicles. These forms of funding would add stress to the soybean industry. VMT fees would lead to high trip costs to move soybeans, affecting truck rates, basis and elevator sales. The North Central Region (Illinois, Indiana, Iowa, Michigan, Minnesota, Missouri, Ohio and Wisconsin) would be the most vulnerable to these fees.

Increasing the use of tolls on bridges and roads would be another alternate source of funding but would be hard to implement. Historically this system only contributed 5 percent to highway funding. Two other options that have been explored include the taxation of speculative crude oil trading, which could raise more than $190 billion in six years, and increasing taxes on containerized shipping.

Issue Conclusion
Competitiveness of U.S. soybeans depends on the efficiency of the U.S. transportation system. Alternative funding will need to be put in place to maintain the U.S. surface transportation system, but funding options should not harm one industry more than others.

For More Information on This Issue
For a copy of the results of the USB/checkoff funded report, click here.

The United Soybean Board’s (USB) Global Opportunities program publishes Global Opportunities Briefing. If you would like permission to redistribute, reprint or repost this information with credit given to the USB/Soybean Checkoff, please contact USB at info@unitedsoybean.org.