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Obama Proposes Tax Reform to Raise Money for Highway and Other Investments

July 30, 2013

By Oliver Patton

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President Obama proposed a tax reform deal that would include a big, one-time investment in infrastructure.

In remarks Tuesday at an Amazon Fulfillment Center in Chattanooga, Tenn., Obama said he would support lowering the corporate tax rate from 35% to 28%, and to 25% for manufacturers.

His plan would pay for the change by eliminating tax loopholes and creating incentives to bring business back from overseas, such as installing a minimum tax on foreign earnings. It also would simplify tax filing and allow small businesses to expense up to $1 million in investments.

He did not detail the numbers but said that the changes could produce one-time revenues for a variety of investments to support job growth, including his “Fix It First” infrastructure proposal.

That proposal, which he first outlined in is State of the Union address last February, calls for a frontloaded $50 billion infrastructure investment, to include $40 billion for deferred maintenance on highways, bridges, transit systems and airports.

He also is calling for a Partnership to Rebuild America to attract private capital to infrastructure investment.

The speech was the fourth stop in an extended grassroots reach-out to build support for the administration’s approach to creating jobs and strengthening the middle class.

“If Washington wants a grand bargain, how about a grand bargain for middle class jobs,” he said.

The tax reform proposal is intended to appeal to Republicans in Congress who believe lower tax rates will give the economy a boost.

“I don’t want Republicans to say no just because it’s my idea,” he said.

Obama did not mention the traditional method of infrastructure funding – user fees collected as fuel taxes, dispensed through the Highway Trust Fund.

This approach has the benefit of providing a long-term revenue stream that gives states confidence to plan for big projects, but the levy has not been raised since 1993 and the trust fund is gradually drying up.

Obama has opposed raising fuel taxes in the past, citing the negative impact on consumers in tough economic times.

His Republican political opposition in Congress also has opposed raising fuel taxes.

Congress and the administration have a little over a year to figure out a solution, since the current highway program expires a year from October.

 

Comments

  1. 1. G.V. FOREMAN [ July 31, 2013 @ 09:09AM ]


    Further aggravating HTF revenue is the fact that since 1998, “excess” revenue collections-when such occurs-is invested in “non-interest-bearing securities”. (1) Prior to October 1, 1998, excess collections, ie, defined as fund monies above and beyond fiscal year expenditures, required investment in interest bearing public debt securities.(1) This legislation, 26 U.S.C. 9503(f), 1998, though maintaining the investment requirement, exempted the public securities from paying interest on such investments, resulting in billions of dollars of lost revenue from the investments. Basically, free money. This legislation needs repealing to require any and all excess funds generated via the federal excise fuel taxes be invested in interest bearing accounts.

    The second part of the answer is “equally” easy—increase the excise tax a minimum of ten cents a gallon in two cent increases a year over a five year period with 100% of the increase dedicated to the HTF. The current fuel tax has not increased since the 1990's. Current MPG rates for all forms of vehicles, cars, trucks, etc, have increased by almost 40% in the past fifteen to twenty years. However, such an improvement in fuel economy has the ulterior results of decreasing revenue collected via the fuel excise tax. Increased fuel economy results in more miles driven for less fuel purchased resulting in few dollars for the HTF.
    1. US Dept. of Transportation Federal Highway Administration, FINANCING FEDERAL-AID HIGHWAYS, July 12, 2012.

  2. 2. G.V.FOREMAN [ July 31, 2013 @ 02:42PM ]

    The answer to financing the HTF, Highway Trust Fund, is really quite simple—quit robbing the trust fund to finance government expenses other than infrastructure and increase the current federal excise tax another ten cents per gallon over a five year period DEDICATING 100% of the entire excise tax(28 cents) to the HTF.

    A quick Wikipedia and the related foot notes reveals that approximately 0.11 cents of the currently accessed 0.1840 cent per gallon tax is “dedicated” to governmental expenses other than HTF purposes. So only 0.940 cents of the eighteen cent tax actually goes into the HTF. This “approach” started in 1982. In 1982, the first increase since 1959, the federal excise tax was increased by five cents per gallon. However, two and half cents of the five cent increase was “dedicated” to support and subsidize mass transit in the US not part of the HTF mission. Again, in 1990, the excise tax was increased another five cents per gallon. The entire five cents per gallon increase was “dedicated” to the US's debt reduction none went to the HTF. The HTF excise tax at this point was 14.10 cents per gallon of which 7.50 cents(over half) was “dedicated” to governmental expenses not related to HTF. Again, in 1993, the HTF tax was raised another four(actually 4.30 cents per gallon). How much of the increase went to the HTF? ZERO!!! The entire increase was “dedicated” to deficit reduction. So as of 1993, 0.11 cents of the “now” 0.1840 cents excise tax was “dedicated” to governmental expenses other than HTF purposes. So, the answer is really quiet simple....quit robbing, quit pilfering the fund. Once 100% of the revenue generated by the excise tax is credited entirely to the HTF, the fund will become solvent over night-historically speaking.

 

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