Going up?

Fuel tax hike opponents now have fewer places  to hide.

By John Latta, Tina Grady Barbaccia and Mike Anderson

The pressure on Congress to raise fuel taxes has just been increased.

A preliminary report by the co-chairs of the President’s deficit commission, and another by two maverick senators have applied the extra pressure.

The preliminary report proposes a 15-cent-per-gallon fuel tax hike and also proposes that the Highway Trust Fund (HTF) be dedicated once again to highways and bridges only (no transit, no bike paths, no parks) and take no money from the General Fund. The net effect would be more money from fuel taxes and no leakage to nonhighway projects. In other words, the HTF would work the way it used to.

The final report may well be available before you get this issue of Better Roads. We are running this story to help your understanding of the full report.

The Deficit Commission (officially the National Commission on Fiscal Responsibility and Reform) co-chairs Republican Alan Simpson, a former Senator from Wyoming, and Democrat Erskine Bowles, a former White House chief of staff, released the preliminary report that they said contains their ideas not the final commission’s plan. The 18-member, bipartisan commission panel report was due December 1.

I had suggested in my September Lattatudes column that this commission may be a “back door” way to raise fuel taxes. An uninformed American public has not embraced the idea that new fuel tax money would go toward highway and bridge work only, even though almost all of it will, and with the deficit co-chairs’ preliminary report, all of it will. As part of a tough deficit-fighting package that will start a ruckus and get the public’s attention – and increase their understanding – a vital fuel tax increase has a chance.

The two senators from the Environment and Public Works Committee, Thomas Carper (D-Del.) and George Voinovich (R-Ohio), have called for a gradual increase in the gasoline tax by 25 cents over three years. They sent their proposal to the commission just days before its preliminary report surfaced, asking that it be included in the final report to the President.

Under the senators’ proposal, 10 cents of the 25-cent increase would be dedicated temporarily to deficit reduction, providing about $83 billion over five years, according to the letter. The other 15 cents, which would be used for transportation projects, would amount to about $117 billion of new funds over five years. This is the formula used in the past when a gas tax raise came via deficit reduction legislation. It happened in 1990 and again in 1993. Under President George H. W. Bush, the gas tax was upped by 5 cents, half of that amount going to the HTF and half to deficit reduction. President Bill Clinton raised the gas tax another 4.3 cents, all of it for deficit reduction. The deficit’s 2.5 cents from the Bush legislation was legislatively redirected to HTF in October 1995. In 1997 Congress redirected Clinton’s 4.3 cents the HTF.

Additionally, said the two senators, the fuel tax would be indexed to inflation after the 25-month period. They said that new revenues from the tax increase would be put in a Treasury escrow account, where it would stay until Congress can approve a new multiyear surface transportation bill.

The senators argued that a gas tax increase is the only solution to an impending dilemma, as the Highway Trust Fund continues to fall short of revenues. Another General Fund transfer would add to the federal deficit. But without a general-fund transfer, outlays to states and localities would have to be reduced, which would damage the overall economy by increasing unemployment as infrastructure projects are delayed or stopped, they argued.

Leaders of more key transportation, construction and labor groups backed the Commission chairs’ preliminary proposal, calling it “bold but necessary.”

“The proposal recognizes the integral relationship between improving transportation infrastructure, economic health and fiscal responsibility. If enacted, it will help prevent economically devastating cuts in federal infrastructure investment and remove the primary obstacle to passage of a multimodel surface transportation reauthorization bill.