Feb. 7 (Bloomberg) -- U.S. highway and bridge projects would be financed by a change in taxes on inherited individual retirement accounts and reallocating other tariffs under legislation before a Senate panel today.
The panel will also consider an amendment offered by Senator Mike Enzi, a Wyoming Republican, to let the U.S. gasoline tax, which raises most money spent by the Highway Trust Fund on road construction, rise with inflation.
The tax of 18.4 cents a gallon was last raised in 1993. President Barack Obama and Republicans in Congress have said they oppose an increase even as the Congressional Budget Office forecasts the trust fund’s highway account may be unable to meet its obligations as soon as October.
The Senate Finance Committee needs to find about $30 billion over two years to pay for road and bridge repairs, the CBO said in a report yesterday. The House version of the legislation, passed by the transportation committee last week, identified funding including the share of gasoline taxes intended for mass-transit projects.
A recommendation to require distribution of inherited individual retirement accounts within five years would bring in about $4.64 billion during 10 years, according to a statement issued by the Senate Finance panel led by Max Baucus, a Montana Democrat.
Under current law, the holder of an IRA must start taking taxable distributions at age 70 1/2. Savings can build tax-free when the account holder dies and leaves the account to someone younger who can spread out distributions over a lifetime.
The proposed change would raise $4.6 billion in the next decade and require people who inherit IRAs to pay taxes on that income within five years of the original holder’s death, with some exceptions.
A separate provision to transfer certain tariff revenue to the Highway Trust Fund would raise $2.61 billion, according to the statement. Other Senate Finance recommendations include closing tax loopholes related to alternative-energy credits and for penalties levied against some low-mileage vehicles and delinquent tax debt.
Enzi is among 276 Republican lawmakers and three Democrats to sign a pledge by anti-tax advocate Grover Norquist promising not to raise taxes.
“If we want to have roads, we have to pay for them. The federal government is out of money,” Enzi said in an e-mailed statement. “There are only two ways to keep the highway program working under the current Highway Trust Fund structure: cutting spending or increasing revenues.”
Senator Orrin Hatch of Utah, the ranking Republican on the Finance Committee, said in an interview that he hadn’t yet discussed Enzi’s amendment with him and wasn’t sure whether he could support it.
“I’m going to listen to what he has to say, and we’ll go from there,” said Hatch, who is up for re-election this year in a state where Tea Party challenger Mike Lee ousted Republican incumbent Bob Bennett in 2010.
Senator John Thune of South Dakota, a member of the Republican leadership, said he hadn’t taken a position on Enzi’s proposal. There’s recognition that the current way of financing construction “is not adequate to keep up with the demands that we have out there in the highway system,” he said in an interview.
“We either have to come up with a new system, or we’re going to have to come up with a much smaller highway program,” he said.
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