Congress poised for rare success, dodges gas tax hike to pay for roads

Congress is poised for a rare moment of bipartisan glee this week with the expected passage of a long-elusive bill that will fund highway and transit projects for at least the next three years.

The celebration will be echoed in state capitals, where officials have begged Congress to produce a multi-year transportation bill that will put them on sound footing when they launch big projects that take years to complete.

But while Capitol Hill has met one pressing need, critics say it has inartfully dodged another: the need to find a better way to pay for the essential systems that move Americans from place to place.

Staff from the House and Senate worked through the weekend to meld the very different funding sources that each body selected to pay for its bill. Their choices were a mix of money that one critic derided as "a sick joke" and former Federal Reserve chairman Ben Bernanke called "sleight-of-hand."

What Congress has steadfastly refused to do - despite the urging of the U.S. Chamber of Commerce, the American Automobile Association, labor unions, truckers and dozens of other voices - is raise the 18.4 cent federal gas tax.

House Speaker Paul Ryan, R-Wis., has been outspoken in his opposition to a gas tax increase. House Transportation Chairman Bill Shuster, R-Pa., calls it an non-starter. Senate Finance Chairman Orrin G. Hatch, R-Utah, says it simply wouldn't pass, particularly in the House.

History and politics are at the core of the issue.

Congress established a penny-per-gallon gas tax in the 1930s, and then upped it 4 cents a gallon in 1959, when President Eisenhower set out to build the interstate highway system. In those days, a Hershey's chocolate bar cost 5 cents. Today, a Hershey's bar costs 89 cents, more than 17 times what it did in 1959. The federal gas tax, last increased in 1993, is not quite four times what it was 56 years ago.

Most Americans tell pollsters they would agree to a modest gas tax increase if it meant their roads and transit systems got repaired.

But a great many members of Congress, particularly in the House, have signed a pledge inspired by the conservative activist Grover Norquist, promising never to raise taxes. In their nightmares they envision the attack ads their political opponents would run if they reneged and voted to increase the gas tax.

Long ago, Congress decided to funnel gas tax revenue into the Highway Trust Fund, a dedicated fund that wouldn't be subject to the whims of future Congresses who might whittle away transportation cash if they saw more pressing needs.

But with cars getting astronomically good mileage when compared to 1959 (or even 1993), there isn't enough money in the trust fund to pay for everything Congress wants. For most of the past decade they have had to siphon about $10 billion a year from elsewhere to keep overall spending at about the $50 billion annual level.

In the past, the additional cash has come from the various general fund sources that have been criticized as gimmickry. For example, a multibillion-dollar pot of money was found in the Leaking Underground Storage Tank Trust Fund, and a controversial process known as "pension-smoothing" allowed companies to delay making mandatory pension fund payments provided that they pay a little bit more later on.

This time around, the non-partisan watchdog group Taxpayers for Common Sense said Sunday, Congress is engaged in "budgetary dark arts" that only "create an illusion of budgetary discipline."

The current bills in conference save the Highway Trust Fund from the brink of collapse with a grab bag of monies. But it's telling that, though each bill sets transportation policy for the next six years, Congress has yet to find the money to pay for more than the first three years.

The House primarily wants to snatch money from the heretofore sacrosanct Federal Reserve surplus account that the bank uses to cushion against potential losses. Fed Vice Chairman Stanley Fischer called tapping the bank to pay for ongoing federal programs a "dangerous" precedent.

The Senate came up with a more ambitious number of sources, including the sale of 101 million barrels of oil from the federal Strategic Petroleum Reserve at an average price of near $90 per barrel. The market price for oil last week dipped below $42 a barrel. They also want to reduce the amount of interest the Federal Reserve pays to banks and redirect cash paid by airline passengers into the Highway Trust Fund.

"This whole process makes a mockery of the users-pay/users-benefit principle on which the federal and state highway trust funds were based," transportation expert Bob Poole of the Reason Foundation wrote recently, calling the funding sources a "sick joke."

Poole served on a special panel that a decade ago recommended a shift from the gas tax to a formula in which drivers are taxed based on each mile they travel. There is considerable agreement that a miles-traveled tax eventually will replace the gas tax.

Though there are pilot programs underway in several states, the transformation process is likely to take more than a decade. The nonpartisan Congressional Budget Office said in June that a 10-cent-per-gallon bump in the gas tax would revitalize the Highway Trust Fund for another 10 years. Rep. Earl Blumenauer, D-Ore., tried without success to amend the House bill to raise the gas tax 15 cents over three years and index it to inflation.

"In the short-term the fuel tax is the only way we can do it that's predictable, that's sustainable, that's dedicated and that allows us to get a reauthorization or maybe two to get on with business," Blumenauer said. "In 12 years we can transition to a national road user charge."

The tax-averse American public has shown a surprising willingness in some polls to accept a gas tax hike if they are confident it will be spent on roads, bridges and transit.

"Even in 2010, when the American economy was not doing well, 62 percent of the people said they would support a [highway and transit] maintenance-focused gas tax increase," said Asha Agrawal, who has directed six years of polling for the Mineta Transportation Institute founded by former House transportation chairman and Clinton-era transportation secretary Norman Mineta.

Agrawal says congressional opposition to raising that tax is "simply people adhering to a no-tax principle."

Jack Basso agrees. Basso recently retired as chief financial officer of the American Association of State Highway and Transportation Officials.

"Ultra-conservative people of the world say 'if you break this [anti-]tax pledge you're dead'" Basso said. "On the Hill, members really do believe that the guns will be turned on them at home by their opponents."

Marcia L. Hale, president of the infrastructure advocacy group Building America's, says no political opponent can build attack ads around tinkering with the Federal Reserve.

"Nobody loses an election by finding something inside the tax code to trim or cut or add to," she said. "It's not as visible as the gas tax."

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