House Transportation and Infrastructure Committee chairman Sam Graves (R-MO) has released the text of his draft budget reconciliation legislative submission for the Transportation and Infrastructure Committee, 24 hours in advance of the committee markup of the legislation at 10 a.m. tomorrow.

We are still reviewing the legislation in its entirety, but the centerpiece of the “chairman’s mark” is sections 100004 and 100005, a new federal motor vehicle registration fee system.

New vehicle registration fees

Section 100004(a) creates a new 23 U.S.C. §180 levying a new annual federal motor vehicle registration fee, to be collected by state DMVs as part of their registration process and then remitted to the Federal Highway Administration (FHWA). There is no mandate for states to comply (a mandate might be unconstitutional) but states are incentivized to comply in two ways:

1. Incentive. Subsection 100004(b) appropriates $104 million for grants of up to $2 million each to state DOTs to implement the registration and fee remittance process. (D.C. and Puerto Rico are treated as states under most provisions of title 23, so its $104 million instead of $100 million).
2. Penalty. The new 23 U.S.C. §180(b) would require FHWA to withhold from annual state highway formula apportionments an amount equal to 125 percent of the estimated federal registration fee amount from if the state does not comply. The penalties would begin with the FY 2027 apportionments.

The effective date for the new fees (except where otherwise noted) appears to be immediate upon enactment, but since section 100004(c) orders the FHWA Administrator to issue regulations to “establish a process for the timely and accurate remittance of fees collected,” that really means whenever the Administrator gets the regulations done.

Fee amounts

The new 23 U.S.C. §180(a) creates three tiers of federal registration fee, with each class of vehicle defined in 23 U.S.C. §180(g):

• $200/year for electric vehicles, meaning a vehicle “with an electric motor as the sole means of propulsion,” effective immediately.
• $100/year for all hybrid vehicles, meaning a vehicle “propelled by a combination of an electric motor and an internal combustion engine or other power source,” effective immediately.
• $20/year for all motor vehicles not covered by the above, effective on October 1, 2030.

Fee levels are to be increased on an annual basis to account for inflation, as measured in the common CPI-U index from the Bureau of Labor Statistics.

All commercial motor vehicles are excluded from the registration fee system, and all farm use vehicles are excluded, as both terms are defined in 49CFR390.5. But motor vehicles owned by state and local governments are not excluded.

Because this is a budget reconciliation bill, the fees are temporary. The EV and hybrid fee collection stops on October 1, 2035 and the fee collection on other motor vehicles stops on October 1, 2034.

Fees to the Highway Trust Fund

New 23 U.S.C. §180(c)(2) provides that states are to remit to FHWA the registration fee receipts no later than 30 days after the last day of each month. Section 100005 then declares that the registration fee receipts from 23 U.S.C. §180 received by the government are to be deposited in the Highway Trust Fund.

Normally, section 100005 would be subject to a “Byrd Rule” challenge in the Senate because, on its own, language depositing money in one fund or another within the U.S. Treasury has no effect on the deficit and is thus “extraneous” to budget reconciliation. But depositing the money in the Highway Trust Fund makes it subject to subsection (c)(1)(B) of 23 U.S.C. §104, the “donor state” 95 percent minimum guarantee.

Since state compliance with the fee collection is technically voluntary, this makes states like Texas much more likely to participate in the fee program, because they will be able to see how participation in the program will increase the amount of federal-aid highway money they will get back if they go along with the fee program. This, in turn, means that depositing the money in the Trust Fund will make states more likely to pay money to the U.S. Treasury, which means it affects the federal deficit, and thus the provision is not extraneous under the Byrd Rule.

Of note: section 100005 only says that the registration fee receipts are to be “deposited into the Highway Trust Fund.” Legally, this means that the entirety of the fee receipts are deposited in the Highway Account and none of the money goes to the Mass Transit Account, because “Highway Account” is defined in law as “the portion of the Highway Trust Fund which is not the Mass Transit Account…” This is, however, something that might be changed later.

How much money will the registration fees raise for the Trust Fund?

Good question. First, we have to assume how many electric vehicles and hybrids will be on the road. The brand-new official estimate from the Energy Department shows the estimated number of vehicles registered, in millions:

Then we have to assume the annual fee levels, which get increased for CPI-U inflation every year. Using the latest (January 2025) Congressional Budget Office economic assumptions for CPI-U shows the original $200/$100/$20 fee levels increasing like so:

Then it is a simple matter to multiply the estimated number of on-road vehicles from the Energy Department times the fees with CBO inflation predictions and get the gross amount of the fee receipts, which we show below in billions of dollars:

This is our own estimate, not that of CBO, and is missing some key parts. We are assuming that the calendar year vehicle totals from DOE are the same as fiscal year fee levels, when in fact they are three months apart, and also assuming full and immediate compliance by states, and that the fee levels themselves will have no effect on EV sales (i.e. complete demand inelasticity).

Also, the EV fleet numbers assume that current law tax incentives and current emissions regulations stay in place. To the extent that reconciliation submissions from other committees make changes in those laws and regulations, anyone scoring EV fee receipts would adjust them downwards to some degree.

So the hypothetical score shown above is probably at the very high end of what CBO might say. $40-ish billion extra to the Trust Fund by the end of the next reauthorization bill, and $110-ish billion by 2035. That sounds like an awful lot of money until you realize that, according to CBO, the Highway Trust Fund’s revenue hole will be around $150 billion at the end of the next reauthorization bill, and the end-of-2035 revenue hole will be an astounding $335 billion.

Here is how the unified Trust Fund cash flow projection made by CBO three months ago would look if our estimated vehicle fees, calculated above, were added (in billions of dollars):

The registration fees make a measurable distance, but aren’t a complete fix on their own.

But wait, how much money will the registration fees raise for deficit reduction, to be counted towards the Committee’s reconciliation target?

The T&I Committee component of reconciliation is being scored against the CBO January baseline, which assumes very rapid EV adoption in the on-road fleet because of IRA tax credits and Biden EPA and NHTSA regulations. Once all the committee pieces of the budget reconciliation bill are assembled, if the Ways and Means Committee repeals those EV tax credits and Energy and Commerce kills the EPA regulations, the budgetary impact of the T&I component will be re-estimated downwards in combination with the submissions of all the other committees.

In addition, there is the “payroll/excise tax offset” to think about. Whenever the government increases a payroll or excise tax, or a fee that acts a lot like a tax, it takes money out of the economy that would otherwise be declared as income by someone, somewhere, and thus reduces income tax receipts by some amount.

Imagine you run a huge trucking company, and Congress increases the diesel fuel tax. You pay an extra $1 million in fuel costs because of the increased tax. All you do is increase the size of your business expense deduction on your tax form by $1 million, which reduces your income tax burden by whatever  your marginal rate is. The Joint Committee on Taxation says that this amount averages around 26 percent per year, depending on the year.

Which means that they hypothetical gross total of $112 billion in fee receipts estimated above would be reduced to a net total of around $83 billion in deficit reduction by the end of 2035.

(There is a loophole here: excise taxes dedicated to trust funds are credited to those trust funds in their full, gross amount, before the income tax reduction is taken into account. The loss to the General Fund is the General Fund’s problem, not the Trust Fund’s problem.)

But remember, the reconciliation directives in the budget resolution specify T&I must have at least $10 billion in deficit reduction between now and the end of 2034, not 2035. So throw out 2035 and you get around $70 billion of savings over the reconciliation budget window, which means that other parts of the T&I submission could increase spending by $60 billion and the committee would still reach its target. But also remember that our score was very optimistic, and CBO will certainly downsize it somewhat based on participation assumptions and a reduced EV sales growth forecast based on the rest of the bill.

Coast Guard appropriations

Section 100001 of the legislation appropriates $22.6 billion from the General Fund of the Treasury for capital expenses of the U.S. Coast Guard, as follows.

Air traffic control capital funding

Section 100008 of the legislation appropriates $15.0 billion for air traffic control expenses of the Federal Aviation Administration. Most is capital funding, but a full $1.0 billion is for air traffic controller recruitment and training, as follows.

John F. Kennedy Center funding

Now that President Trump has taken personal control over the Kennedy Center, it has moved to the front of the line for capital upgrades, apparently. To wit:

There are additional Customs fees and freight forwarder fees established by the legislation that we are still analyzing.

IRA Rescissions

The reconciliation draft rescinds all unobligated balances from the portions of the Inflation Reduction Act that are under Transportation and Infrastructure jurisdiction. We don’t have estimates yet of the amount remaining, but the committee press release says that the rescissions total $4.6 billion, meaning that around $4.0 billion of the $9.0 billion in IRA funding has already been obligated and is thus beyond reach.

The bulk of the $4.6 billion that is being rescinded is believed to be in the Neighborhood Access and Equity Grants program.