Gas Tax Bonds Would Fund $500B of Infrastructure Under Bill

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DALLAS – Bonds backed by annual increases in federal gasoline and diesel taxes would provide $500 billion of new federal transportation funding through 2030 under legislation introduced by Rep. Peter DeFazio, D-Ore.

The Treasury Department would be authorized to issue up to $17 billion per year of the new 30-year Invest in America bonds backed by the higher federal fuel taxes in the measure, H.R. 1664.

The bill, known as the Penny for Progress Act, was filed Wednesday by DeFazio, the top Democrat on the House Committee on Transportation and Infrastructure.

DeFazio's plan would index increases in the federal gasoline tax of 18.4 cents per gallon and the diesel tax of 24.4 cents per gallon to construction inflation and improvements in vehicle fuel efficiency. The formula would probably result in a 1-cent per gallon tax increase per year, with a hard cap of 1.5 cents per year, he said. Proceeds from the bonds supported by the incremental increases would be deposited into the Highway Trust Fund.

"It's a pathetically small increase in the gas tax, and if anybody [in Congress] doesn't have enough guts to vote for something that can do a $500 billion investment, that would create tens of thousands of jobs, they don't belong here," DeFazio told reporters on Wednesday.

The proposal was crafted to attract the support of President Donald Trump, DeFazio said.

"The president's key component in his campaign was a $1 trillion investment in infrastructure," he said. "I'm trying to help deliver on that with real investment. There is some question and, I think debate, going on at the White House on whether they're going to do real investment or are they going to do pretend investment."

President Trump's backing is necessary because House Republicans are resistant to raising taxes for additional federal infrastructure funding, DeFazio said.

"This is going to have to be a push by the president," DeFazio said. "He's going to have to push the Republican leadership in the House if he really wants to get this done and get federal investment."

The proposal would increase federal surface transportation funding by $20.3 billion per year, about 30% over current spending, he said.

The revised federal taxes would, in their first full year, provide an additional $3.2 billion of federal transportation aid to states, $630 million for formula and discretionary freight infrastructure programs, and $85 million for new low-interest loans and loan guarantees from the Transportation Infrastructure Finance and Innovation Act.

Seventeen states have raised their gasoline taxes since 2003 but federal fuel taxes have not been increased since 1993, DeFazio said. As a result, he said, the gasoline tax has lost 40% of its purchasing power to inflation and lawmakers have transferred billions of general fund revenues into the HTF to maintain an adequate level of federal funding for highways and transit to the states.

"Although states have raised their state gas taxes to meet critical needs, federal partnership is needed to maintain the federal highway system," he said. "States cannot go it alone."

DeFazio also introduced a bill (H.R. 1265) earlier this month that would remove the $4.50 per ticket cap on the federal passenger facility charge that airports use to support revenue bonds for terminal projects and related infrastructure.

The American Society of Civil Engineers sees DeFazio's gas tax plan as "a major step towards meeting the nation's transportation funding needs," said Brian Pallasch, the association's managing director for government relations and infrastructure initiatives.

The ASCE earlier this month said the U.S. should invest an additional $1.1 trillion in surface transportation over the next 10 years.

"The Penny for Progress proposal is exactly the sort of forward-looking policy idea we need to repair and improve our nation's infrastructure," Pallasch said.

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