Highways, Taxes, and Partisanship: The Next Crisis

by King & Spalding
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The Highway Trust Fund is almost empty; it is running on fumes. Without congressional action before the August recess, the fund that has been essential since the 1950s to maintain the nation's transportation infrastructure will become insolvent and go bankrupt. If it does, an estimated 700,000 people will lose their jobs before Labor Day, and critical infrastructure projects will close down. There are currently over 100,000 road projects funded by the fund. This is a crisis. Congress must address the issue during a short session in July before the August Recess. Regrettably, the issue reflects once again how partisan and seemingly unresolvable the politics of Washington have become.

The Highway Trust Fund was established in 1956, during the Eisenhower Administration, to build and maintain America's highway system. A gasoline excise tax was imposed to partially fund the program. Originally, it was limited to three cents per gallon. It has been raised several times since then with the support of Presidents Ronald Reagan, George H. W. Bush, and Bill Clinton. In 1993, it was raised to 18.4 cents per gallon. On each occasion, a bipartisan center of the Congress led by the president kept the fund solvent. Most Americans recognize the need for infrastructure improvements and a gas tax used to pay for them has generally been understood and supported.

Driving to the edge of the cliff, the House has finally acted, passing by a large bipartisan majority a short term $11 billion fix that will fund programs through May 2015. Any long term legislation would have required new taxes, and there was no consensus as to how that would be accomplished. Several prominent conservative groups have denounced it.

President Obama has recommended a long-term fix, ending the gas tax and paying for a massive transportation bill by closing corporate tax breaks and mandating that U.S. companies repatriate their offshore profits. Various bills have been introduced in Congress to fund transportation spending, including ending certain mail deliveries on Saturdays, transferring funds from other programs and significantly raising the gas excise tax, legislation that has been endorsed by the U.S. Chamber of Commerce. None of these proposals have sufficient support for passage.

Senate Finance Committee Chairman Ron Wyden (D-OR) and Ranking Member Senator Orrin Hatch (R-UT) have been confidentially discussing a short term, six month solution as a bridge to move to a larger debate over comprehensive tax reform next year, but Majority Leader Harry Reid (D-NV) is reported to be against it. Senator Reid could force a vote on the House bill this week, avoiding the need for a conference committee. There is not much time. The only real bipartisan agreement is not to let the Highway Trust Fund go bankrupt just before the critical mid-term elections.

Michael A. Andrews

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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