Volume 2, Issue 5 – March 15th, 2014
In late February President Obama called for the creation of a $302 billion, four-year highway program to be paid for largely through tax reforms – and by doing so he may have ensured that we won’t get one this year.
The President unveiled his proposal Feb. 26 at the Union Depot in St. Paul, MN, a hub for bus, light rail and Amtrak passenger services.
The site proved to be appropriate because the program’s mass transit and railroad projects were given equal prominence with highways when Obama and administration officials introduced then and a week later when the plan was included in the President’s 2015 budget proposal submitted to Congress.
Republican leaders all but declared the President’s budget proposal dead on arrival. “The president has once again opted for the political stunt for a budget that’s more about firing up the president’s base in an election year than about solving the nation’s biggest and most persistent long-term challenges,” said Senate Minority Leader Mitch McConnell (R-KY).
“This budget isn’t a serious document; it’s a campaign brochure,” said House Budget Committee Chairman Paul Ryan (R-WI).
For some time now there has been widespread agreement that infrastructure funding, and the Highway Trust Fund in particular, need a boost. But the dilemma all along has been securing agreement on how to fund it.
The President is calling for a corporate tax overhaul that would quickly yield $150 billion by tightening loopholes for U.S. companies doing business abroad, and raise another $56 billion over 10 years
from a new fee on other domestic companies and financial institutions.
Surprisingly, some prominent Republican House members also have embraced similar ideas for funding the highway program through tax reform.
Two weeks before the President announced his proposal in St. Paul, House Pennsylvania Republican and Transportation and Infrastructure Committee Chairman Bill Shuster said he was hoping Congress would
approve a multi-year highway program by this summer.
At that time Shuster noted that among the funding ideas under discussion was repatriating profits from American companies that are keeping them in foreign countries to avoid taxes.
Shuster later endorsed tax reform legislation that was introduced the same week the President made his highway plan announcement by Michigan Republican Dave Camp, chairman of the House Ways and Means Committee.
The Camp legislation would reduce the number of tax brackets, shrink businesses’ write offs, limit mortgage reductions and repeal other homeowner deductions. Under Camp’s bill, $126.5 billion of the money raised by these changes would be dedicated to the Highway Trust Fund for eight years. Although Camp’s proposal garnered support from Shuster – it generated outright opposition from top Republican leaders in the House and the Senate.
All of this leaves in limbo those industry associations and legislators who had thrown their weight behind funding the program by increasing fuel taxes
One recent proposal that attracted support from industry groups came from Rep. Earl Blumenauer (D-Ore.). It would raise federal fuel taxes by 15 cents per gallon, to be phased in over three years, raising an estimated $170 billion in revenues over a period of 10 years.
Lending their support for the proposal were American Trucking Associations, the U.S. Chamber of Commerce, UPS, Amalgamated Transit Union, Associated General Contractors of America and the
American Society of Civil Engineers.
Many of these organizations, along with the National Industrial Transportation League, had endorsed the general idea of raising fuel taxes long before Blumenauer introduced his legislation.
Now, with President Obama and Rep. Shuster veering into uncharted territory, it may prove difficult for these groups to focus their members to support using tax reforms to fund the program, especially when the details have yet to be pinned down in the highly fluid and volatile political environment of an election year.
A Pressing Need to Act
The most recent highway program enacted in 2012, called Moving Ahead for Progress in the 21st Century Act (MAP-21), was a two-year stopgap measure designed to keep the program going after it became evident a more ambitious multi-year plan could not be passed.
MAP-21 didn’t raise taxes but the legislation authorized $109 billion in spending in highway construction and maintenance.
In the past conventional wisdom has held that no multi-year highway program could be passed during an election year. But even if Congress does not pass a multi-year program, it will need to take some sort action this year because the Highway Trust Fund will dry up by Sept. 30.
In fact, the revenues generated by fuel taxes proved to be inadequate to meet the goals of MAP-21 since it was passed. In recent years Congress has supplemented Trust Fund shortfalls with total of $55 billion in transfers from the general fund, as well as a transfer of about $10 billion for fiscal year 2014 alone.
For a more detailed exploration of these issues, see ACWI Advance Editor David Sparkman’s article in the March issue of Material Handling & Logistics magazine (http://mhlnews.com/).
