June 24 (Bloomberg) -- The Senate Finance Committee this week will begin consideration of a $9 billion infusion to keep the U.S. Highway Trust Fund running through the end of the year.
The legislation by Senate Finance Committee Chairman Ron Wyden, an Oregon Democrat, will pay for the proposal by raising a heavy-vehicle use tax and making other tax and compliance changes related to retirement accounts and mortgage interest. He plans to bring the bill before his committee on June 26.
Current funding expires at the end of September. The Department of Transportation is projecting the part of the Highway Trust Fund that pays for road and bridge projects will run short of cash in July or August as fuel taxes haven’t kept pace with construction needs. Wyden said he’s trying to avoid the transportation equivalent of a government shutdown.
“In a fragile economy, I don’t want to take that risk,” he told reporters.
Democrats and Republicans in Congress, who can’t agree on how to fund a long-term measure, have pitched a variety of short-term patches to avert an election-year construction slowdown. Wyden described his proposed tax-related offsets as “benign” and an “olive branch,” as he continues talks over changes with Republicans on the committee who haven’t signed on.
A sticking point with his proposal is that it doesn’t include spending cuts sought by Republicans. Senator Orrin Hatch of Utah, the top Republican on the committee, said he’ll work with Wyden to try to add spending cuts to the proposal, and expressed disappointment the measure isn’t bipartisan.
“The committee must act in a bipartisan manner and forge compromise by including a sizable amount of reductions in wasteful and low-priority spending,” Hatch said in a statement.
Senator John Thune of South Dakota said he and his fellow Republicans aren’t looking for a battle over a measure needed to keep roadwork going at the height of the summer construction season. He said he hopes to achieve modest changes this week.
“Obviously, we have a bit of a crisis we have to deal with,” he said in an interview. “We’re sensitive to that and we’re looking at some alternatives.”
The part of the fund that pays for highway projects had a cash balance of $8.1 billion as of May 31, down from $10.5 billion in October, according to data from the Transportation Department.
To pay for the $9 billion infusion, Wyden is proposing to double the maximum use tax for heavy vehicles weighing as much as 80,000 pounds to $1,100 a year. That provision is estimated to raise about $1.35 billion over 10 years, according to a summary of the legislation.
Wyden would also change mortgage-interest deduction documentation in a way that he says can raise $2.2 billion over 10 years through better tax compliance. Banks would be required to report more information to the IRS about mortgages, including the unpaid balance and the address of the property.
The biggest chunk of money is projected to come from a provision that would force people who inherit IRAs and other retirement plans to take required taxable distributions over five years. Under current law, they take those payments over a longer period that is linked to their life expectancy. The change is expected to generate $3.7 billion in revenue over 10 years.
Wyden’s proposal also would require the Secretary of State to revoke passports for delinquent taxpayers. Current law allows the State Department to refuse to issue or renew a passport if an applicant owes child support in excess of $2,500 or certain types of federal debts, but does not extend to tax delinquency.
Wyden’s proposed tax changes would generate $9 billion in revenue over 10 years, including $3 million in the current fiscal year and $285 million in fiscal 2015, according to the Joint Committee on Taxation estimate provided by Wyden.
Senator Bob Corker, a Tennessee Republican, called it a “sham” for the U.S. to “borrow” money over 10 years to pay for a six-month extension of the trust fund.
The current two-year law that authorizes federal highway and mass transit programs expires in September.
In the House, Republican leaders last week dropped plans to bring to the floor a proposal to provide a highway fund “patch” by curbing most postal delivery to a five-day schedule.
House Ways and Means Committee Chairman Dave Camp, a Michigan Republican, told reporters that he will offer a “different approach” than Wyden’s that will extend the trust fund’s solvency for a longer period. He said he will decide on a proposal after the week-long congressional recess for the July 4 holiday.
President Barack Obama in April sent to Congress legislation that would provide $302 billion for road and transit projects over four years. His proposal would boost the highway fund $87 billion above current levels partly through taxes on overseas earnings and other related changes.
The Senate Environment and Public Works Committee last month approved a six-year measure to provide the same amount of money annually as the current two-year, $105 billion bill expiring in September, plus inflation. The measure doesn’t address funding.
Groups including the U.S. Chamber of Commerce and the AFL-CIO are pushing both chambers to complete a six-year measure.
To contact the editors responsible for this story: Romaine Bostick at email@example.com Elizabeth Wasserman