Obama, Camp Offer Highway Funding Solutions
February 26, 2014
President Obama and Rep. Dave Camp both suggested one-time infusions to the Highway Trust Fund that is expected to run out of money by September.
Obama is calling for $302 billion over four years in a proposal to reauthorize the federal highway program. About half of the money, $150 billion, would come from corporate tax reform, and $63 billion would go to plugging the hole in the Trust Fund.
Camp, R-Mich., Chairman of the House Ways and Means Committee, released a plan to comprehensively reform the tax code that would dedicate $126.5 billion over eight years to the Trust Fund.
These recommendations came as transportation interests gathered around Capitol Hill to discuss solutions to the oncoming crisis in highway funding.
The Trust Fund is on track to run into the red perhaps as soon as this summer, and states are fearful that the Department of Transportation will soon be forced to cut back the flow of funds for ongoing projects.
If that happens the states may have to suspend their highway project plans, said Mike Hancock, president of the American Association of State Highway and Transportation Officials in remarks to that group on Wednesday.
The gist of the message from highway users, including American Trucking Associations, gathered at a round table hosted by the House Transportation and Infrastructure Committee was that while all funding options should be considered, the quickest and surest way to solve the problem is to raise the federal fuel tax.
But that is not going to happen.
“Stop going off the cliff,” Rep. John Mica, R-Fla., told the group. “(Congress) is not going to pass a gas tax increase.”
A miracle may yet emerge from Obama’s or Camp’s proposals but the more likely solution is to find a way to fund transportation through the fall election and then work with Congress on a long-term solution, Mica said.
Alternatives to a fuel tax increase in the long term might be a sales tax, indexing, moving the point of taxation from the fuel pump to the well or alternative financing approaches, he said.
Sen. Barbara Boxer, D-Calif., speaking at the AASHTO meeting, also does not see enough support to make a fuel tax increase happen.
Her personal preference is to get rid of the fuel tax and levy a fee at the refinery level that would go to the Trust Fund but said she does not expect that approach to pass.
She said Obama’s approach is viable because it is based on reforming just the corporate tax structure, rather than the entire tax system as Camp is proposing.
Boxer said that the solution needs to be put in place by June to reassure states that federal funds will continue to flow.
It will be difficult for Congress to put together a long-term funding source by then, which raises the possibility of a fallback that no one wants: a stopgap transfer from the general fund to keep the Highway Trust Fund whole until a long-term solution can be put in place.
Boxer, chair of the Senate Environment and Public Works Committee, and Rep. Bill Shuster, R-Pa., chair of the House Transportation and Infrastructure Committee, are calling on all interested parties to beat the drum for a solution. Those two committees are writing the policy portions of the next highway bill and expect to have drafts on the floor by spring or summer, but the funding solution will have to come from the Senate Finance Committee and the House Ways and Means Committee
Joining the call for a cooperative approach was Rep. Tom Petri, R-Wisc., chair of the T&I panel’s Highways and Transit Subcommittee.
The Highway Trust Fund could go over the cliff this summer, he warned. “We need a longer-term framework. A crisis is a terrible thing to waste.”
The White House said that President Obama is committed to working on a solution that avoids the near-term crisis and funds transportation over the long term.
The plan, which Obama announced Wednesday at the Union Depot train station in Saint Paul, Minn., includes $150 billion in one-time transition revenue from reforms in business taxes. The White House said that’s enough to address the Trust Fund crisis and increase infrastructure investment over four years.
Obama also announced $600 million in new TIGER competitive grants. Grants under the Transportation Investment Generating Economic Recovery program have generated $3.5 billion in highway work.
The Camp proposal would create a new individual tax structure, collapsing the current complex system into two brackets: 10% and 25%, depending on income. It also would lower the corporate tax rate to 25%.
A release from Camp’s office says that the $126.2 billion dedicated the Highway Trust Fund would fully fund infrastructure investment for eight years.
Rep. Shuster said in a statement that the Camp and Obama proposals increase focus on the challenges facing the Highway Trust Fund and the importance of the federal role in transportation.
ATA President and CEO Bill Graves said it is heartening that Obama and Camp recognize the need for investment.
“While a sustainable source of long-term funding would be preferable, given the apparent reluctance to embrace traditional, user-funded revenue streams, ATA is prepared to keep an open mind when looking at financing options for the Highway Trust Fund,” Graves said in a statement.