Murphy-Corker Gas Tax Increase: Beginning of a Bipartisan Solution?
Posted at 8:08 a.m. on June 19, 2014
Corker (Chris Maddaloni/CQ Roll Call File Photo)
With federal highway funding about to run dry this summer, will Congress vote to increase the gasoline tax to refill the Highway Trust Fund? It seems a long shot, but a bipartisan agreement begins with two – and two senators have stepped forward.
The gasoline and diesel tax increase offered Wednesday by Sen. Chris Murphy, D-Conn., and Sen. Bob Corker, R-Tenn., won’t be part of any short-term plan to replenish the Highway Trust Fund. CQ Roll Call transportation reporter David Harrison said the bipartisan duo acknowledged that “Congress would probably not be able to adopt their plan in time to rescue the fund this summer. But they said they hoped their proposal could be part of a long-term fix that would allow infrastructure spending to be paid for entirely from user fees.”
The Murphy-Corker proposal would at least avoid the option that Congress has chosen since 2008 of shifting money from general Treasury revenues to the Highway Trust Fund – money that could have been used for non-transportation needs such as buying submarines and making National Science Foundation grants to colleges and universities.
According to the Congressional Budget Office, “since 2008 lawmakers have enacted legislation to transfer a total of more than $54 billion to the trust fund—mostly from the Treasury’s general fund.”
Murphy and Corker aim to increase gasoline and diesel taxes by 12 cents per gallon over two years. They said this would provide enough money (about $164 billion) to meet transportation needs over the next 10 years. They’d also index the gasoline tax to the Consumer Price Index. Their idea resembles one offered by Rep. Earl Blumenauer, D-Ore.
They’d try to offset the effect of the tax increase by making permanent the now-temporary tax breaks for research and development and for capital investment, Harrison reported.
According to the Tax Policy Center, the R&D tax credit “has been enacted for one year at a time and has been extended for eleven straight years.” That is in itself almost a kind of permanence, but formally making the R&D credit permanent is a perennial idea. In fact the House voted to do just that last month, with 62 Democrats joining 212 Republicans in voting for it. The staff of the Joint Committee on Taxation said would cost $155.5 billion in lost revenue over 10 years.
The Murphy-Corker plan is not without its political pitfalls. As Roll Call’s Humberto Sanchez reported, “Using the tax break extension to offset a gas tax increase would … take away the ability to use those same tax breaks to buy down tax rates as part of a future tax reform package.”
One tax lobbyist said the Murphy-Corker proposal raises equity concerns that are politically problematic. They are, he said, “offering a tax increase to drivers (i.e., individuals) and offsetting it by extending R&D and capital investment (business). How does that work politically?”
In a report Wednesday, the Committee for a Responsible Federal Budget joined the debate on how to fix the Highway Trust Fund. It said “the most fiscally responsible solution to the HTF shortfall would be to address the long-term structural imbalance” by bringing revenues in line with transportation spending. Making the fund solvent “would remove the need to constantly bail it out and eliminate the uncertainty created by periodic warnings of imminent HTF exhaustion.”
But if no long-term remedy is feasible right now, the report said, an “acceptable alternative” would be “to transfer funds from general revenue while fully paying for that transfer through other tax or spending changes.”
It said “any general revenue transfer into the HTF should be offset by real savings elsewhere in the budget.” That means cutting spending or eliminating tax breaks.
The report suggested that “policymakers could consider reducing or repealing any of a number of transportation-related tax breaks. Repealing the so-called ‘SUV loophole’ – which allows businesses to deduct unlimited expenses for vehicles weighing more than 6,000 pounds – as most SUVs now do – would generate enough revenue to extend the HTF by about 8 months and close 5 percent of the ten-year gap” in transportation funding.
But the fiscally hawkish group warned that “under no circumstance should lawmakers rely on a deficit-financed (or gimmick-financed) general revenue transfer to fund the HTF.”