Taxes or tolls? Five fixes for highway funding

Lawmakers are searching for a way to pay for a new transportation bill before federal funding for road and transit projects expires at the end of May.

Members of both parties say they want to see transportation funding extended with little drama, but they have yet to reach a consensus about how to do that, creating the potential for a standoff as the deadline approaches.

The House Transportation and Infrastructure Committee is scheduled to hold a hearing about the highway bill on Tuesday, where members will be able to debate the path forward.

Here are five ideas lawmakers could put on the table.

1.) Raise the gas tax

Transportation advocates have said raising the 18.4 cents per gallon federal gas tax would be the easiest way to pay for a new infrastructure bill.

The gas tax has been the main source of transportation funding for decades, but it has not been increased since 1993, sapping its buying power.

{mosads}While the tax hike has backing from business associations and unions, the idea has run into opposition from conservative groups such as Club for Growth and Heritage Action, and GOP leaders in the House have suggested it is a non-starter.

The federal government typically spends about $50 billion per year on transportation projects, but the gas tax will only bring in $34 billion annually without an increase. 

2.) Taxing overseas corporate profits

Some lawmakers are pushing to fund the highway bill through taxes on corporate profits that are held overseas.

The proposal would require companies to bring back earnings to the United States and pay a one-time, 14 percent tax rate on them.

Budget groups and conservatives labeled the corporate tax proposal a “gimmick,” and transportation advocates have complained it would not address the underlying problems in infrastructure funding.

The Obama administration, which supports the plan, says it could generate $238 billion in new revenue for the government that could be used to pay for infrastructure improvements. 

3.) New tolling systems

Some groups are pushing to increase the use of tolls on American highways to help pay for their maintenance.

Advocates have said tolling is the easiest way to replace the gas tax with a similar “user fee” that charges drivers directly for the upkeep of the nation’s roads.

Opponents counter that polls show voters do not want to pay to drive on roads that are currently free. A large increase in the use of tolling would require lifting a current ban on states placing tolls on existing highway lanes, which has been controversial in the past.  

4.) Barrel tax

Supporters of keeping transportation funding tied to gasoline sales have suggested changing the source of the gas tax from drivers to oil wholesalers.

The proposal, which has been dubbed the “barrel tax,” would implement a per-barrel tax on oil companies to fund federal transportation projects instead of having drivers pay at the pump.  

States such as Virginia have switched from a tax at the pump to a barrel tax in recent years as federal transportation funding has dried up. Supports of the proposal argue that moving to a federal barrel tax would give drivers a break at the pump while providing more funding for transportation improvements.

5.) General fund transfer

With just two months to go before the expiration of the current highway bill, observers of Congress say the most likely solution will be a temporary extension that takes money from other areas of the federal budget.

Transportation Secretary Anthony Foxx has lamented the number of temporary transportation funding patches — 32 by his count — that Congress has passed since 2009. None of the temporary transportation bills has lasted longer than two years.

Foxx said the uncertainty about the available of federal funding is discouraging states from starting large transportation projects.

But with each passing day, another short-term patch becomes more likely.

Tags Anthony Foxx Gas Tax Highway bill Highway Trust Fund MAP-21 Reauthorization Repatriation Tolling
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