House Majority Leader Kevin McCarthy (R-Calif.) said Monday that a gas tax hike is unlikely to be approved by Congress this year.
Transportation advocates have pushed for a gas tax increase to help pay for an extension of an infrastructure funding measure that is scheduled to expire on July 31.
But McCarthy said in an interview with The Wall Street Journal on Monday that the reality of politics makes raising the gas tax unlikely. He went on to say that it will be difficult to come up with a funding source to pay for five years of highway funding.
“Highway is a major problem in America,” he said. “We make policy in the world of politics. If you thought, ‘Well, why don’t you just raise the gasoline tax?’ Well, politically that will not make it. Let’s think of something else. How do you have a funding mechanism where you could actually fund a five-year plan?”
The gas tax, currently 18.4 cents per gallon, has been the traditional source of transportation funding since its inception in the 1930s. But the tax has not been increased since 1993, and improvements in auto fuel efficiency have sapped its purchasing power.
The federal government typically spends about $50 billion per year on transportation projects, but the gas tax only brings in approximately $34 billion annually.
The Congressional Budget Office has estimated it will take about $100 billion to close the gap long enough to pay for a six-year transportation funding bill, which is the length being sought by the Obama administration.
The Department of Transportation has warned that it will have to start cutting back on payments to state governments at the end of July if Congress does not reach an agreement on an extension of the infrastructure funding measure.
Lawmakers have turned to other areas of the federal budget to close the transportation funding gap in recent years, resulting in temporary fixes, such as a two-month patch approved by lawmakers last month.
Transportation advocates have complained that the temporary extensions prevent states from completing badly needed long-term infrastructure projects.
McCarthy said in the interview Monday that an alternative plan that would tax overseas corporate revenue is a more viable option to pay for a long-term transportation bill. The proposal, known as repatriation, calls for giving business a reprieve from penalties for avoiding prior taxes if they agree to move money back to the U.S. and pay a 6.5 percent tax rate on it.
“There’s a coalition that cares about highways, but there’s also a coalition that cares about tax reform,” McCarthy said. “There’s a way that, if you took the highway bill today and you extended it toward the end of the year, and you had tax reform and highways combined so you could find also a pay-for in there, those are two coalitions that are married together.”
The Obama administration has also embraced the repatriation proposal, but the president has argued the tax on overseas profits should be mandatory and collected at a higher rate.
McCarthy said he is not in favor of making the taxes on overseas profits that would be used to pay for roads mandatory, however.
“I’m not talking about raising taxes,” he said. “But I see so many American companies have so much money overseas, because that’s the way the structure works.
“I do not like the version that the president has, but I think another version could work, and a big chunk of money can come,” McCarthy continued. “So that could be a one-time funding of highways. And highways could have five more years to figure out how they’re going to fund them in the future.”