Opposing interest group coalitions are taking sides on a proposal to fund transportation projects by increasing the federal gas tax.
In recent years, Congress has repeatedly passed short-term highway bills that authorize more funding than the Highway Trust Fund collects in gas tax revenues, forcing lawmakers to find supplementary funding sources. Last year, for instance, Congress used controversial “pension gimmicks” to secure about $3 billion in transportation funding. (RELATED: Senate Highway Bill Contains ‘Smoothing’ Pension Gimmick)
According to the Hill, a coalition led by the U.S. Chamber of Commerce, AAA auto club and the American Trucking Association sent a letter to members of Congress on Monday claiming that, “raising the gas tax would be the easiest way to close a transportation funding shortfall that has reached an estimated $16 billion per year.”
The federal gas tax currently stands at 18.4 cents per gallon, but has not been raised in over 20 years, and supporters of an increase believe that today’s low gas prices create an opportunity to raise it without unduly burdening consumers or the economy.
“While no one wants to pay more, we urge you to support an increase to the federal fuels user fee,” the group wrote, calling such a move “the most cost efficient and straightforward way to provide a steady revenue stream to the Highway Trust Fund.” (RELATED: As Oil Prices Fall, Lawmakers Propose Higher Gas Tax)
An opposing coalition of 50 free-market advocacy organizations, led by Americans for Prosperity, responded on Wednesday with a letter urging Congress to reject the proposed tax hike.
“Not only is increasing the gas tax an ineffective way to address the nation’s transportation infrastructure needs,” they write, but it would also threaten the still-fragile economic recovery, because “a higher gas tax means higher prices not just on gas, but on goods and services throughout the economy.”
That case is illustrated, the letter contends, by the recent drop in gas prices, which saves the average family nearly $100 per month and “is expected to lead to an additional $100 billion of economic growth.” Raising the gas tax, conversely, would represent the equivalent of “a regressive tax hike on middle- and lower-income Americans,” wiping out many of those gains.
Moreover, “As with so many other issues in Washington, transportation infrastructure has a spending problem, not a revenue problem,” and new tax revenues would merely promote even greater inefficiency and waste.
Currently, the group points out, “over one-third of HTF spending today is for non-highway purposes,” including such projects as bike paths and squirrel sanctuaries, while at the same time, “wage rules and other burdensome regulations needlessly add time and cost to transportation infrastructure projects.”
An alternative proposal, floated by Republican Sen. Rand Paul, would finance a long-term transportation bill through a “repatriation tax holiday,” which would allow U.S. companies to bring foreign earnings into the country at a significantly reduced tax rate, theoretically stimulating domestic investment. (RELATED: Repatriation Holiday Won’t Fix Highway Funding Shortfall, Critics Say)
Paul estimates that reducing the tax rate on repatriated earnings to 10 percent, from the current 35 percent, would generate about $16 billion in additional tax revenues annually, which would roughly cover the current transportation-funding shortfall.
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