Obama Proposes Tax Changes To Pay For Highway Trust Fund

President Obama last week urged lawmakers to overhaul corporate and business taxes to pay for repairing and replacing the nation’s aging roads, rails, bridges and tunnels.

Caught between a gridlocked Congress and a Highway Trust Fund that will soon be broke, President Obama last week urged lawmakers to overhaul corporate and business taxes to pay for repairing and replacing the nation’s aging roads, rails, bridges and tunnels.

Speaking at a cavernous renovated transit hub in Minneapolis, the president avoided the politically treacherous solution that most transportation experts say is necessary in the short term: raising the federal gas tax that has been frozen at 18.4 cents per gallon for the past two decades. Officials said Obama opposes a gas-tax increase.

Instead, the president offered a stopgap proposal for fixing some of the nation’s crumbling infrastructure that White House officials hope will appeal to his Republican adversaries. Even as he spoke in Minnesota, House Republicans offered a broader tax overhaul plan that mimicked some of the White House provisions.

“There are leaders in both parties who are willing to reach across the aisle when it comes to infrastructure,” Obama said to an enthusiastic crowd. But he said there were “some Republicans in Congress who have refused to act,” and he chided his opponents for failing to embrace obvious opportunities to create jobs.

New legislation to pay for transportation projects is an urgent priority for both parties because the highway fund is nearing insolvency. Anthony R. Foxx, the transportation secretary, has said the fund could begin “bouncing checks” by this summer. That would force a halt to construction projects around the country, officials have said, and could undermine as many as 700,000 jobs.

The president’s proposal, which he first suggested in a speech last summer in Chattanooga, Tenn., would eliminate business and corporate tax loopholes to finance a four-year, $302 billion transportation bill. White House officials declined to be specific, but said they would try to eliminate incentives for companies to ship jobs overseas.

Advocates for increased transportation funding praised the president’s efforts, but said the idea fell far short of what was needed. Kathleen Bower, a spokeswoman for AAA, the automobile association, called it a “one-time patch” and said a gas-tax increase was “the most viable, responsible and effective near-term solution.” Edward G. Rendell, the former governor of Pennsylvania and co-chairman of Building America’s Future, called it an “attractive political compromise.”

“It’s not enough, it’s not nearly enough,” Mr. Rendell said. But he added that a gas-tax increase was not currently “a viable political option.”

Since Congress created it in 1932, the gasoline tax has been the chief source of revenue for building American highways. It was designed as a classic user fee — drivers pay for construction and maintenance of the roads they use. Throughout the 20th century, it financed the construction and maintenance of the interstate highway system, and presidents from both parties regularly signed gas-tax increases to keep revenue on pace with inflation and the nation’s growing infrastructure needs. Ronald Reagan raised the gas tax twice.

But the tax, which is not indexed to inflation, has not been raised since 1993, when Bill Clinton increased it by 4.3 cents to its current rate.

Two years later, the conservative lobbyist Grover Norquist asked Republican lawmakers to sign on to a pledge never to raise taxes. Since then, any proposal to increase the tax has been dead on arrival in Washington. But according to the Congressional Budget Office, the highway trust fund is now on the brink of bankruptcy. Absent an injection of new funding, the budget office projects that the fund will run out of money by next year, racking up a $77 billion deficit through 2019 and a $172 billion deficit through 2024.

White House officials said Obama’s plan would use savings from business tax changes for a one-time, $150 billion infusion of cash into the trust fund to make it solvent. The president also proposed spending $600 million on so-called Tiger grants, which allow states to compete for additional money for regional transportation projects.

On Tuesday, Mr. Obama made the case privately for his transportation funding proposal to the House speaker, John A. Boehner of Ohio, during an hourlong Oval Office meeting, according to officials with knowledge of the conversation. Mr. Boehner, who has said that Republicans are eager to overhaul and simplify the corporate tax system, nonetheless expressed skepticism to Mr. Obama on Tuesday about the proposal to finance transportation spending with business tax changes, the officials said.

Still, some members of both parties have shown some optimism about the possibility of a compromise on a transportation bill, even in an otherwise gridlocked Congress whose members are facing re-election in a matter of months.

House Republicans on Wednesday released their own proposal for a tax overhaul that would cut the top corporate income tax rate to 25 percent from 35 percent and reduce the number of individual income tax brackets to two from seven. A spokesman for the House Transportation and Infrastructure Committee said lawmakers would review the president’s proposal.

To read more, click HERE.