Road Funding Plan Links Gas Tax Hike, Income Tax Rebate

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DALLAS – A transportation group is proposing raising the federal gasoline tax to 33.4 cents per gallon to provide funds for a $401 billion, six-year highway and transit capital investment program, but giving taxpayers a $90 per year rebate to make up for the higher taxes.

The American Road & Transportation Builders Association’s “Going Beyond Gridlock” plan also proposes a repatriation tax on corporate foreign earnings to generate the $103.3 billion to offset the six years of income tax rebates. ARTBA president Peter Ruane said repatriation is one idea because it is “within the mainstream of current political dialogue” in Washington, but that other options could be considered as well.

“We’re not wedded to repatriation,” he said. “Corporate tax reform is complex and it’s going to be a very heavy lift.”

The major congressional roadblock to a multiyear federal transportation bill would be resolved by linking a 15 cent per gallon increase in the federal levy on gasoline and diesel with an income tax rebate, said ARTBA president Peter Ruane.

There’s bipartisan agreement in Congress that a long-term, robust transportation bill is needed, but no consensus on how to resolve a $15 billion a year shortfall in the Highway Trust Fund, he said.

“This proposal takes away the political question of how you fund a robust transportation program because you do it by raising the user fee, and it creates the political question of how you pay for the rebate,” he said.

Ruane pointed out that the 10-month extension of the Highway Trust Fund set to expire May 31 required an $11 billion transfer from the general fund provided by pension smoothing calculations while President Obama’s $478 billion, six-year transportation proposal is funded with $240 billion from a new tax on corporate foreign earnings.

“If our national leaders think they need to use budget gimmicks or ‘one-offs’ again to pass the surface transportation investment program the states need and the business community has been pleading for, then use those devices to provide a $90 tax rebate to middle and lower income tax filers to offset the cost to them of a 15 cent per gallon increase in the federal gas tax,” he said.

The federal gasoline tax is a proven revenue producer, Ruane said.

“It is reliable, predictable, and viable for at least the next 10 years,” he said.

The higher fuel levy would bring in an additional $159.2 billion to the $241.6 billion of expected collections from the current federal fuels tax.

The $401 billion, six-year program would provide $43.8 billion a year for highways and $10.8 billion for public transit. It would include a total of $62 billion for freight projects and $15.5 billion for transit-related grants.

The $90 rebate would more than offset the annual estimated $87.56 cost of the higher gasoline levy to the average motorist, said ARTBA chief economist Alison Black.

Truckers would pay an additional $682 per year at the proposed rate of 39.4 cents per diesel gallon, but only personal income tax payers will get the rebate of $90 for individuals and $180 for joint filers, she said. The rebates would be limited to filers with taxable incomes of $100,000 per year or less, and $200,000 or less for joint filers.

The higher gasoline tax rate would be permanent and not indexed to inflation, but the rebates would be authorized only for the six years of the transportation program, she said.

The new tax rate in the ARBTA proposal would be applied immediately rather than phased in with three annual 5 cent increases as provided in a bill by Rep. Earl Blumenauer, D-Ore.

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