Effects of Coronavirus Not Fully Felt Yet in Transportation Trust Fund Tax Receipts

Effects of Coronavirus Not Fully Felt Yet in Transportation Trust Fund Tax Receipts

April 09, 2020  | Jeff Davis

The beginnings of decreased demand for transportation were registered in the excise tax receipts deposited in the various federal transportation trust funds in March 2020, the financial reports of which became available this week. But delays built into the tax payment and reporting process mean that the March tax payments only cover economic activity from the first half of March (before stay-at-home orders and mandatory social distancing), so the full effects on federal coffers won’t be known until the April financial reports are released in the second week of May.

Highway Trust Fund. The process by which motor fuel tax payments are made and registered is convoluted. If you make a decision today whether or not to go to a gas station and fill up your car, the gas that you either buy or don’t buy today already had its full federal excise tax paid days earlier (maybe a week earlier) when it left the wholesale tank farm (the “rack”) to be loaded into a tanker truck to be delivered to the gas station. So your economic decision to buy or not buy gas won’t show up in the form of reduced demand at the wholesaler for several days, at a minimum.

The wholesaler pays estimated excise taxes to the IRS twice a month. But there is a built-in lag between the economic activity being taxed and the payment of the tax. Per the excise tax calendar in IRS Publication 509 for 2020, fuel wholesalers were required to pay estimated taxes on March 13 “for the last 14 days of February.” Then they paid estimated taxes on March 27 “for the first 15 days of March.” So any decrease in economic demand at the wholesale level for motor fuel after March 15 won’t show up until April, and there was already several days more lag built in between the decreased demand at the pump and the decreased demand being felt by the wholesaler.

(The two-week lag makes the first month of the fiscal year effectively a two-week month and the last month a six-week month, which is why line charts of monthly HTF receipts look so weird. Also, the Heavy Vehicle Use Tax is on a different schedule – it only gets paid once a year and the majority of operators pay it in July-August.)

The March 2020 reports show that gross motor fuel tax payments (gasoline and diesel combined) for the last two weeks of February and the first two weeks of March were $382 million, or 11.6 percent, below the comparable period in 2019. In addition, payments from the excise tax on sales of new trucks and trailers (the most volatile of the HTF revenue sources, very susceptible to swings in the business cycle) were down $269 million, or 44 percent, from the same period a year ago.

The April tax receipts, which will reflect actual economic activity in the last half of March and the first half of April, will undoubtedly be much, much worse.

Monthly Highway Trust Fund Tax Receipts

Millions of dollars. Gross excise tax receipts (pre-transfer to AATF, LWTF and SFTF), preliminary and unaudited from Treasury monthly reports.
Gasoline Diesel Truck FET Tires HVUT TOTAL
FY 2019 FY 2020 FY 2019 FY 2020 FY 2019 FY 2020 FY 2019 FY 2020 FY 2019 FY 2020 FY 2019 FY 2020
Oct 475.3 511.2 190.4 212.7 70.4 96.3 9.2 11.0 67.9 75.8 813.2 907.1
Nov 2,706.0 2,802.0 1,153.9 1,185.7 442.2 546.3 53.5 53.9 32.7 42.3 4,388.2 4,630.2
Dec 2,338.5 2,310.3 997.2 977.7 382.2 450.4 46.2 44.5 29.3 34.9 3,793.3 3,817.7
Jan 2,113.5 2,402.1 901.2 1,016.5 345.4 468.3 41.8 46.2 25.6 36.3 3,427.4 3,969.4
Feb 2,299.3 2,283.4 955.6 958.3 349.2 436.3 45.3 34.6 31.0 56.5 3,680.3 3,769.1
Mar 2,244.5 2,032.6 1,036.1 865.8 615.2 346.5 58.7 31.7 67.9 30.1 4,022.4 3,306.8
First 6 Mo. 12,177.1 12,341.6 5,234.4 5,216.7 2,204.5 2,344.1 254.6 221.9 254.3 276.0 20,124.9 20,400.3

Airport and Airway Trust Fund. The non-fuel aviation taxes are on an even more delayed reporting schedule than the highway taxes. Per Publication 509, estimated air transportation taxes paid on March 11 covered “tickets sold during the first 15 days of February” and taxes paid on March 25 covered the last 15 days of February.

Compare that schedule to how the coronavirus spread worldwide and you would expect the revenue effects to show up first in the receipts from the $18.90 per passenger “head tax” on international travelers entering or leaving the U.S., and you would be correct – those tax receipts dropped 33 percent in the February estimated tax payment period (vs February 2019) and were down 24 percent in the March period versus a year ago.

The bulk of the tax hit won’t be felt by the Trust Fund until the April reporting. (10/10/20 addendum: I had a brain freeze when I was writing this. Of course, section 4007 of the law signed on March 27 declared an AATF tax holiday, effective on that date through December 31, so the April revenue reporting is going to be close to zero.)

In fact, gross tax receipts for the first half of fiscal 2020 were still slightly ahead of fiscal 2019. (There was a weird surge in the domestic airfare and segment tax receipts in February, possibly due to amended tax filings.)

Monthly Airport and Airway Trust Fund Tax Receipts

Millions of dollars. Gross excise tax receipts (including kerosene transfers from HTF), preliminary and unaudited from Treasury monthly reports.
Domestic Persons International Air Cargo Fuel TOTAL
FY 2019 FY 2020 FY 2019 FY 2020 FY 2019 FY 2020 FY 2019 FY 2020 FY 2019 FY 2020
Oct 168.7 157.5 65.2 74.1 8.4 11.9 12.6 13.8 254.8 257.3
Nov 1,044.3 1,161.0 376.1 418.8 55.3 63.8 73.6 74.0 1,549.3 1,717.6
Dec 902.4 957.2 325.0 345.3 47.8 52.6 63.6 61.0 1,338.9 1,416.2
Jan 815.6 995.3 293.8 359.0 43.2 54.6 57.5 63.5 1,210.0 1,472.4
Feb 1,445.1 2,336.1 588.2 391.2 78.8 51.4 92.4 98.1 2,204.4 2,876.8
Mar 910.7 862.9 428.6 327.7 89.2 47.2 62.6 52.6 1,491.2 1,290.4
First 6 Mo. 5,286.7 6,470.0 2,076.9 1,916.1 322.5 281.5 362.4 363.1 8,048.6 9,030.7

Harbor Maintenance Trust Fund. Receipts from the various Customs duties on imports at U.S. ports that are deposited in the HMTF, together with interest on balances, were down 12 percent in February 2020 versus February 2019 and then down 19 percent in March 2020 versus March 2019. However, these may not get that much worse, as imports from Asia are picking back up as the initial coronavirus wave has burned through China, South Korea, and some other countries.

HMTF Receipts and Interest

Millions of dollars.
FY 2019 FY 2020 Change
Oct 157.6 147.9 -6.1%
Nov 190.5 130.5 -31.5%
Dec 119.9 123.6 3.1%
Jan 130.6 128.5 -1.6%
Feb 173.6 152.5 -12.1%
Mar 131.0 106.5 -18.6%
First 6 Mo. 903.1 789.6 -12.6%
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