ARTBA Proposes Path to Breaking Gridlock on Highway/Transit Funding

March 12, 2015

“Getting Beyond Gridlock” plan would match federal fuels tax increase with offsetting tax rebate for middle and lower income Americans. The American Road & Transportation Builders Association (ARTBA) outlined a proposal it believes could end the political impasse over how to fund future federal investments in state highway, bridge and transit capital projects. 

The “Getting Beyond Gridlock” plan would marry a 15 cents-per-gallon increase in the federal gas and diesel motor fuels tax with a 100 percent offsetting federal tax rebate for middle and lower income Americans for six years.  The plan, ARTBA says, would fund a $401 billion, six-year highway and mass transit capital investment program and provide sustainable, user-based funds to support it for at least the next 10 years.

ARTBA believes that an increase in user fees, specifically the federal motor fuels excise rate, is the most efficient way to resolve the Highway Trust Fund (HTF) cash flow problem—now about $15 billion per year—and raise revenue needed to fund expanded capital investments in freight mobility and traffic congestion relief over the next decade.  That has also been the recommendation of two blue ribbon commissions mandated by the Congress and the National Commission on Fiscal Responsibility and Reform (Simpson-Bowles) appointed by President Obama.

But so far, the politics of a user fee increase has been a stumbling block. The proposed ARTBA plan addresses that.

ARTBA proposes marrying the first increase in the federal gas and diesel motor fuels tax rate in 22 years with, if necessary, an offsetting annual gas tax rebate for middle and lower income taxpayers for the length of the next surface transportation program reauthorization bill, which is due May 31.

Under the ARTBA plan, a single tax filer with an Adjusted Gross Income (AGI) of $100K or less would receive a $90 per year tax rebate—the average annual cost to them of a 15 cent gas tax increase.  Joint filers with an AGI of $200K or less would receive a $180 rebate.  ARTBA’s analysis shows the rebate would completely offset the gas tax increase for 94 percent of American tax filers.
ARTBA points out that during the Bush Administration, Congress provided tax rebate checks of up to $600 for individual filers and $1,200 for joint filers in 2008.  A similar tax rebate plan was enacted in 2001.

Ruane says it’s up to the Senate Finance and House Ways & Means committees to figure out how to pay for the tax rebate.  But the association offered one possible mechanism that has been elevated over the past year in the political discussion on highway and transit funding—a one-time federal repatriation transition tax.  

The Obama Administration has proposed using a 14 percent transition tax on, what it says, is the up to $2 trillion of untaxed foreign earnings that U.S. companies have accumulated overseas to augment the existing HTF revenue stream and fund its $478 billion six-year transportation proposal.

Last year, former House Ways & Means Committee Chairman Dave Camp (R-Mich.) proposed raising $126.5 billion over 10 years through a repatriation transition tax for the HTF to fund an eight-year status quo surface transportation investment authorization as part of his comprehensive tax reform plan.

This year, Rep. John Delaney (D-Md.) has introduced legislation to use deemed repatriation at an 8.75 percent tax rate to generate an additional $120 billon to the HTF for six years.

The ARTBA tax rebate proposal would require $103.3 billion over six years.
“Just using repatriation as a one-time, short-term patch for Highway Trust Fund investments,” Ruane says, “does not address or resolve the trust fund’s underlying revenue stream problem.” After the repatriation “fix” period is over, he says, “the trust fund’s cash flow problem not only returns, but will be worse than it is now, threatening another crash in the highway and transit investment program.”

He noted the proposed additional gas tax cost over a year “is less than we all pay each month for cell phone service.”  He added, “I submit the mobility we get from our modest, individual contributions to transportation infrastructure improvements is an outstanding return on investment.”

In modeling its plan, ARTBA used the U.S. Energy Information Administration’s 2014 forecast for domestic motor fuel consumption and vehicle miles traveled over the next six years, the Federal Highway Administration’s (FHWA) data on the volume of motor fuel taxed, the U.S. Bureau of Labor Statistics inflation forecast, the U.S. Census Bureau’s population projection, and U.S. Treasury Department and Internal Revenue Service tax collection and filing data.

ARTBA says a 15-cent motor fuels tax increase would generate an additional $27 billion per year for HTF investments.  The association’s model shows that would end the eight-year HTF revenue crises cycle.

With the additional revenue, ARTBA says, the existing core highway and transit programs would keep pace with forecasted inflation.  Given that the FHWA forecasts truck traffic will increase 56 percent between now and 2040, ARTBA recommends using a significant portion of the remaining newly generated user revenue—about $12 billion per year—to fund federal investments in multi-modal capital projects that upgrade the U.S. freight network and help reduce traffic congestion bottlenecks on it.