Miles Tax Discussed by Shuster to Pay for Roads

At a Feb. 4, 2014 Bloomberg Government infrastructure event in Washington, DC, House Transportation and Infrastructure Committee Chairman Bill Shuster rejected the idea of raising the nation’s 18.4 cents-per-gallon gasoline tax. Photo: David Banks/Bloomberg Close

At a Feb. 4, 2014 Bloomberg Government infrastructure event in Washington, DC, House... Read More

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At a Feb. 4, 2014 Bloomberg Government infrastructure event in Washington, DC, House Transportation and Infrastructure Committee Chairman Bill Shuster rejected the idea of raising the nation’s 18.4 cents-per-gallon gasoline tax. Photo: David Banks/Bloomberg

(Corrects context of remarks in headline and first paragraph of story published Feb. 4.)

House Transportation and Infrastructure Committee Chairman Bill Shuster said user fees including a vehicle miles tax need to be considered to pay for U.S. highway construction in the long term.

Shuster rejected the idea of raising the nation’s 18.4 cents-per-gallon gasoline tax, now the primary method of paying for road, bridge and mass transit projects. Besides a mileage tax, he said other funding methods include higher taxes on energy exploration and bringing back corporate profits earned overseas.

“We don’t want a two-year bill, we want a five- or six-year bill,” Shuster said at a Bloomberg Government infrastructure event in Washington.

A vehicle miles tax has never been considered on the federal level because of objections to the concept of tracking how many miles people drive to assess and collect the levy. There have been some state- and local-level experiments.

A partisan dispute in Congress over tax increases is clouding potential action on a long-term highway bill backed by companies including Caterpillar Inc. (CAT) It’s also heightening the risk that the U.S. will run out of money to pay for projects later this year.

The federal government may have to delay some payments to states before the fiscal year ends in September, the Congressional Budget Office said today in updating the financial status of the Highway Trust Fund, which pays for road and bridge projects from gasoline taxes.

Gasoline Tax

Its estimates back recent statements from U.S. Department of Transportation officials who have said the fund was running out of money more quickly than was anticipated when Congress passed a two-year highway bill in 2012.

Groups led by the U.S. Chamber of Commerce, the biggest business lobby, want to prevent a repeat of 2012, when proposals to fund roads, bridges and mass transit for six years sputtered over bipartisan opposition to raising the gasoline tax. The shorter-term measure, which used general tax revenue to keep highway construction going, expires Sept. 30.

The gasoline tax has stayed at 18.4 cents a gallon since 1993 and isn’t indexed to inflation. Revenue from the levy has declined since 2007 through a combination of a lagging economy, fewer miles driven and more efficient cars.

The tax’s purchasing power has declined almost 40 percent over the past two decades, according to the American Association of State Highway and Transportation Officials.

Skeptical Senators

Lawmakers in both parties, including Republican Senator Roy Blunt of Missouri and Democratic Senator Carl Levin of Michigan, already have said they doubt Congress can forge a consensus on the tax-financing issues and pass a bill that authorizes programs for five or six years as industry groups want.

“Based on the performance of the Senate over the last three years, a six-year highway bill is a pretty big expectation,” Blunt said in an interview last month.

The balance in the highway portion of the Highway Trust Fund as of the end of November was $9.22 billion, down 24 percent from a year earlier, according to the Federal Highway Administration. The CBO estimated the balance will be $1 billion at the end of September, one-fourth of what the Transportation Department said it needs to pay bills as they become due.

Bill’s Boosters

While the legislation’s supporters and business groups point to the House’s passage of an $8.2 billion water projects bill last year as a breakthrough on infrastructure spending, that measure didn’t require a large tax increase.

Business groups say a long-term bill could boost the economy and that the short duration of the current law has sparked uncertainty for companies involved in long-term projects, and also for the state and local officials who decide the terms of contracts.

The Chamber and other groups have endorsed a bill introduced in December by Representative Earl Blumenauer, an Oregon Democrat and member of the Congressional Progressive Caucus, that would boost the gasoline tax by 15 cents a gallon over three years.

Victor Mendez, acting deputy secretary at the Department of Transportation, wouldn’t commit today to how a highway bill should be funded, and said the administration will seek consensus on that with lawmakers later this year. At the same time, he made clear that President Barack Obama’s administration doesn’t want another short-term bill.

“If you’re looking for certainty, you can’t find it in a two-year bill,” Mendez said.

Inflation Indexing

Former Transportation Secretary Ray LaHood and former Pennsylvania Governor Ed Rendell called today for raising the gasoline tax by 10 cents a gallon and indexing it to inflation.

Senator Barbara Boxer, a California Democrat and chairman of the Environment and Public Works Committee, proposed in September replacing the gasoline tax with a levy paid on oil at refineries. She has said such a tax, which has been floated by research groups including Rand Corp. and the Carnegie Endowment for International Peace, could generate enough revenue to fund highways and mass transit for six years.

Boxer is in talks with Senator David Vitter of Louisiana, the top Republican on the panel, to move a joint highway bill. Vitter is open to some kind of revenue increase, although the two haven’t agreed on the method, said Luke Bolar, a Vitter spokesman.

To contact the reporter on this story: Laura Litvan in Washington at llitvan@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net

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