TRANSPORTATION:

Opposition to vehicle miles traveled tax underscores tough funding choices for infrastructure bill

To understand the infrastructure pickle Congress is in, look no further than the National Republican Senatorial Committee's (NRSC) website -- where a petition slams Democrats for proposing to "tax you for every mile you drive."

The White House says it's not considering a tax on vehicle miles traveled as part of a long-term transportation reauthorization bill to replace the existing system, which runs out on Sept. 30. That idea appeared in a recently leaked draft plan that a White House spokesman insists had not been vetted by top officials.

When asked about the retreat, the NRSC's chairman acknowledged that the "shortage of money" for a new federal infrastructure measure is "a real problem." The increasing inability of the federal gas tax to pay for better roads, rails and bridges, comes from several factors, Sen. John Cornyn (R-Texas) said yesterday: more fuel-efficient cars, people driving less in the weak economy and because "Congress has, frankly, been raiding" gas tax proceeds for other projects for years.

Of course, Cornyn's candor does not change his opposition to a mileage tax. "We need to come up with some better ideas," he said in a brief interview. "But that's not a better idea, that's a worse idea."

So far, however, a "better idea" hasn't presented itself to any policymaker, slowing progress on a bill that is already sure to face a tough slog through both chambers. The administration balked on proposing a funding source for its six-year, $556 billion reauthorization plan and Transportation Secretary Ray LaHood has steadfastedly insisted that the funding decisions are up to Congress.

Any increase in the gas tax is seen as so politically toxic that a proposal hasn't gained any traction in Congress since the last increase in 1993. Other funding strategies, like tolling or reducing tax breaks for oil companies, have been met with lukewarm response.

That essentially leaves Congress with just one option, said transportation analyst Ken Orski, a former transportation official under Presidents Nixon and Ford.

"It's what [House Transportation and Infrastructure chairman John] Mica (R-Fla.) is saying, that the government has to live within its means," Orski said. "In the transportation context, that means living with revenue that flows into the highway trust fund, which is not an insignificant amount of money ... That has allowed us to maintain current systems, but it does not allow large-scale new capital additions."

But keeping everything at its existing levels could spell doom for the transportation sector. At a House appropriations hearing this spring, Federal Highway Administration head Victor Mendez told legislators that given existing revenues, the gas tax could only support the nation through the first quarter of 2013. It's thought that in its current form, the tax could only support about $300 billion for six years, well short of what the White House or transportation advocates want.

Congress has in recent years had to draw heavily from the general fund to cover shortfalls from the gas tax, but even that is becoming a politically dicey maneuver that faces an uncertain future.

Sticking at current levels won't sit well with the Obama administration, which has been touting the president's "big, bold transportation vision." The White House wants to spend heavily on transportation and infrastructure to create jobs, as well as move the country away from its dependence on cars.

The president's proposal would spent $53 billion on high-speed and intercity rail and more than double spending on public transit in an attempt to create a greener, more efficient transportation network.

Funding vs. financing

In order to reduce the role of the federal government and its strained books, many Democrats and Republicans alike have pitched the concept of public-private partnerships (PPP). Cornyn and fellow Sen. Mark Kirk (R-Ill.) said more work is necessary to leverage private-sector capital as part of any new federal infrastructure legislation.

Kirk said he would soon be offering his own PPP bill. But one plan in that vein, a bill from Sens. John Kerry (D-Mass.) and Kay Bailey Hutchison (R-Texas) that sets up a National Infrastructure Bank (NIB), is already attracting bipartisan support -- and offering political cover to at-risk lawmakers spooked by tax increases.

Orski said those financing measures, along with similar proposals to expand TIFIA (Transportation Infrastructure Finance and Innovation Act) loans and Build America Bonds, could prove popular, but wouldn't address the underlying issue.

"There are proposals for financing innovations as opposed to funding ... and they're all being mentioned to help increase our capability to invest in transportation," Orski said. "But financing is no substitute for funding. It's a mechanism, but it doesn't provide additional funds."

The NIB, for example, is aimed at new large-scale projects that might have trouble getting full support from private firms or regional governments. But they don't offer much solace to a state looking for a few extra bucks to repave a crumbling highway or build a new transit line.

On the other hand, Kirk said yesterday that a per-mile fee is "an idea whose time never came," Kirk said. He called it a "regressive tax" that would hit his rural constituents harder than others and an "invasion of privacy" for drivers, since it would likely require a mileage-tracking device installed in their cars.

Although a VMT pilot program has been completed in Oregon and the Congressional Budget Office has described it as an "efficient" replacement for the gas tax that could even deter excess driving, it has gotten almost no support elsewhere.

Kirk also underscored the degree to which six-year transportation bills, a staple since the Eisenhower administration that once allowed lawmakers to brag about securing local projects, are becoming a casualty of the new debt-conscious era in Washington.

Asked whether he anticipated less public infrastructure spending in the next long-term bill, Kirk said a cut of 10 percent to 20 percent "across the board" is important "to make sure the dollar doesn't end up in jeopardy."

Can a smaller bill work?

The bill may have bigger problems than just a tax dispute. In an interview Tuesday, Sen. James Inhofe (R-Okla.), ranking member of one of the committees in charge of the transportation funding measure, said he was still working on wrangling some of his GOP colleagues to back the bill. The problem wasn't "the funding source so much as just the will to do it."

"A lot of the Republicans are concerned with anything that deals with big numbers," the Environment and Public Works ranking member said. He said the gas tax revenues provide a "starting point," but beyond that are a lot of question marks.

Even though Inhofe boasts of his conservative values, he is fond of pointing out that he and EPW Chairman Barbara Boxer (D-Calif.) agree on the need for infrastructure spending. But voting through a bill with a price tag in the hundreds of billions, let alone one with a tax increase, is a tough pill for the fiscally conscious GOP to swallow.

Inhofe said that might require a compromise on a two-year bill instead of one that goes six years. Sen. Max Baucus (D-Mont.) also said that proposal is on the table, although stakeholders and legislators would prefer a long-term bill. State transportation planners say a six-year bill gives them certainty to secure financing for large projects, whereas anything shorter would leave them uncertain and unwilling to take out loans.

Robert Puentes, a transportation expert with the Brookings Institution, has said a two-year bill might be the most politically feasible option. It gives states a stable source of funding so they can continue on their projects and delays the funding debate until after the 2012 elections, when the White House and Congress might be more willing to discuss a gas tax hike or VMT.

Already, candidates for re-election like Sen. Claire McCaskill (D-Mo.) have made a show of opposing new taxes. In a letter to LaHood last week, McCaskill embraced the Kerry-Hutchison bill while slamming the nixed mileage tax concept as punitive for "people who are already cutting back on necessary household expenses and struggling to fill their gas tanks."

Democrats recognize that vulnerable colleagues such as McCaskill cannot seriously weigh mileage or gas tax increases during an election year. But with the GOP in charge of one half of Congress, the president's party has every intention of holding Republicans responsible for making difficult transportation funding choices.

"They're proposing to decrease the already pathetic level of spending on surface transportation infrastructure by 35 percent," Rep. Peter DeFazio (D-Ore.) said of House Republicans.

The GOP's 2012 budget would "accelerate the rate of deterioration of the Eisenhower-era infrastructure," he added, calling on contractors and other construction industry interests to "push back" against such slashes in federal funding.

It's thought that T&I chairman Mica is sticking with a six-year bill, but may pare it back to below the levels of the existing bill. Inhofe and Boxer are mum about how much money they'll seek. Both chambers have promised to put their bills out by Memorial Day.

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