One of the biggest hurdles in passing a new $450 billion surface transportation bill this year will be finding a way to pay for it.

Revenue from the federal gas tax, the major funding source for the road and rail projects authorized by the transportation bill, is starting to flag as Americans drive less and turn to more fuel-efficient cars.

As a result, there may not be enough money in the Highway Trust Fund to pay for the new transportation bill.

Business groups, including the American Trucking Association and the U.S. Chamber of Commerce, favor increasing the gas tax to pay for the highway bill, but the Obama administration has opposed hiking the gas tax rate above 18.4 cents per gallon during the recession.

White House spokesman Nick Shapiro said that the administration is “working closely with Congress to solve this difficult problem and ensure that states have the resources they need to maintain our roads and highways.”

The Chamber and other industry groups see a higher gas tax as the most straightforward way to pay for much-needed infrastructure improvements. It would also mean users of the transportation system would fund transportation improvements.

Fuel taxes are “currently the most efficient and effective way to raise revenue for highways and public transportation,” said Janet Kavinoky, the director of transportation infrastructure for the U.S. Chamber of Commerce. “There is not another major source of funding for users that is ready for primetime.”

The role reversal of the tax-averse business lobby and the White House may put Congress in a pickle as it seeks to pass a new surface transit bill before the current one expires at the end of September.

House Transportation and Infrastructure Committee Chairman Jim Oberstar (D-Minn.) will introduce his draft of the bill this month. Oberstar has estimated that the legislation, which lasts for six years, will cost approximately $450 billion.

The initial draft, however, probably won’t spell out how to pay for the transit projects, a decision that will ultimately come down to the House Ways and Means Committee, according to Oberstar’s spokesman, Jim Berard. That decision may not happen until the bill is passed by the House and makes it to a conference with the Senate, Berard said.

Oberstar has set a goal of getting the transit bill through the House this month and through the Senate and onto the president’s desk before October. But Congress will be hard-pressed to meet that deadline; the Senate has yet to schedule when it will take up its version of the transportation legislation, and both chambers have set healthcare reform, a climate change bill and spending measures as their top priorities this year.

Lawmakers understand that some sustainable source of transportation revenue needs to be found. Last year, Congress injected an $8 billion supplement into the highway trust fund, which is where gas tax revenue goes, because the fund was about to run out.

In the past, Oberstar has supported a five-cent gas tax increase to fund bridge replacement and rehabilitation projects. But the proposal never gained much support from other lawmakers, Berard said.

He signaled that Oberstar may consider a gas tax increase and other options this year, including a new levy based on the number of miles driven, but the Minnesota Democrat hasn’t settled on any particular solution.

“Most likely what actually happens will be a combination of things, not just a single formula,” Berard said.

 

A gas tax increase is the most “obvious solution” in the short term because it’s simple and inexpensive to administer and because it’s already in place, said Robert Puentes, director of the Metropolitan Infrastructure Initiative at the Brookings Institution.

“That said, the gas tax has some looming problems as Americans drive less,” he said.

While a tax based on miles driven could supplement the gas tax revenue, it could be more controversial because it would require the government to keep tabs on how much each American drives, Puentes said. He said that lawmakers will need to be clear with the public over the goal of their new transportation projects before “the conversation about the gas tax — or whatever it is — becomes easier.”

Transportation Secretary Ray LaHood signaled in February that he’d be open to such a tax, but White House press secretary Robert Gibbs later said that it won’t be the administration’s policy.

Still, LaHood stressed to lawmakers in March that they need to think “outside of the box” to come up with sources of funding other than a gas tax. Lawmakers could consider new partnerships between governments and private companies and a national infrastructure bank to provide bonds to finance projects, LaHood said.

“This administration is not in a mood to raise gasoline taxes when the economy is as bad as it is, so you’re not going to see us promoting the idea of a raise in the gasoline tax to plus-up the Highway Trust Fund,” LaHood said.                                       (Return to Top)