With the May 31 deadline for reauthorization of the federal-aid highway and federal transit programs quickly approaching, finding a solution for keeping the Highway Trust Fund (HTF) solvent remains the biggest hurdle. Recently Sen. Finance Committee Chair Orin Hatch (R-Utah) – whose committee is responsible for finding revenue to finance the Highway Trust Fund – established a task force to recommend ways to keep the fund solvent. Chairman of the task force, Sen. Dean Heller (R-Nev.), said this week that his group plans to identify a funding mechanism that would support a five- to six-year authorization bill.
As part of this discussion, Senate Majority Whip John Cornyn (R-Texas), said the idea of allowing U.S. oil companies to export crude oil to provide additional revenue for the Highway Trust Fund “has some potential.” Exporting crude oil is currently prohibited by law. The ban was established in 1975 in response to the Arab oil embargo, and according to industry reports, lifting the ban would raise an estimated $1.3 billion in revenue annually. The Senate Energy and Natural Resources Committee has scheduled a March 19 hearing on the crude oil export ban, which is getting a second look, as U.S. oil production has skyrocketed because of advances in hydraulic fracturing and horizontal drilling. Other ideas being considered in the Senate include expanding domestic energy production on federal land and using the increased revenue for the Highway Trust Fund. AGC identified a number of energy-related funding sources in our funding options paper that was distributed during the TCC fly-in last year. View the AGC’s recommendations here.
In addition, last week, the Tax Foundation, a well-respected nonpartisan Washington, D.C. tax policy “think tank,” released a report that looks at options to fix the Highway Trust Fund. The report lays out the problems – it says a permanent fix is necessary but politically difficult – and it points out that temporary measures do not fix the problem. It also points out that the president and some in Congress have suggested a tax on foreign-earned profits of multinational corporations to provide stop-gap funding and pay for additional infrastructure spending. The report states that this type of proposal violates a number principles of good government finance, among them, the user-pays principle which states that taxpayers should pay for the government services they use.
The report also says a number of positive things about the gas tax; it is relatively less distortive than other taxes, it conforms to the benefit principle (we call that user pays) and closing the funding gap will give Congress an opportunity to make big decisions about the future of federal investment in infrastructure. The paper models a 10 cents-per-gallon increase, plus indexing to provide the $168 billion needed over ten years to keep current funding. In the first year, the gas tax will raise approximately $15 billion more than it currently does. The Tax Foundation modeled the increase and its impact on the GDP over the next ten years. They then modeled some tax policy modifications that might offset the GDP impact of a gas tax increase, including:
- A 2 percentage point decrease in the capital gains tax rate;
- A 2 percentage point decrease in the top marginal income tax rate;
- A $1,000 increase in the standard deduction;
- A 1 percentage point decrease in the bottom marginal income tax rate; and
- An expansion of the Earned Income Tax Credit.
The tax foundation report can be found here.
For more information, please contact Brian Deery at deeryb@agc.org or (703) 837-5319. Return to Top