Does the 113th Congress live for an adrenaline rush? The current debate over the nation’s highway trust fund might lead one to think so.
As has been widely reported, the federal Highway Trust Fund, which is supposed to provide a steady stream of long-term funding for the nation’s highway infrastructure, is projected to be depleted by early August, rendering the federal government incapable of paying for hundreds of current and pending infrastructure projects. In anticipation of this rapidly-approaching deadline, the federal Department of Transportation has sketched a contingency plan that would cut federal transportation spending by 28 percent while idling vital infrastructure projects around the nation.
The good news is that lawmakers have a blindingly obvious solution to this problem at their fingertips: restoring the federal gas tax to something resembling its level in the early 1990s. A September 2013 report from the Institute on Taxation and Economic Policy found that if our federal gas tax had been maintained at the same inflation-adjusted level since it was last increased in 1993, the trust fund would have enjoyed more than $200 billion in additional revenues, including $19 billion in 2013.
Despite having more than two decades to think about it, Congress has refused to acknowledged the existence of inflation, and the federal gas tax has essentially fallen by more than a quarter, in inflation-adjusted terms, since the last gas tax hike.
But not to worry—with less than two weeks before the Highway Trust Fund evaporates, congressional tax writers are elbowing each other aside to engineer a buzzer-beating fix for our highway funding woes. Unfortunately, the proposed fixes rely largely on, “pension smoothing,” a misnomer practice that actually won’t raise revenue over the long haul. Pension smoothing allows companies to contribute less to their pension funds over the next decade, which raises revenue because companies take fewer tax deductions for pension contributions.
The plan would increase corporate tax revenue over the next 10 years. But companies would have to make up the resulting pension shortfall later, which means federal revenue would once again be reduced. Conveniently, this falls outside Congress’s 10-year budget window. This transparent attempt to borrow from future taxpayers would only raise enough money to keep the Trust Fund solvent through May of next year. Congress will then confront exactly the same problem.
Responsibly overhauling the federal gas tax by increasing its inflation-adjusted value to 1993 levels and tying the tax to inflation going forward would help restore the Highway Trust Fund to its former health. If Congress can’t take this medicine now, they’ll have to do so next year. They should just stop the bandage politics of kicking the can down the road and address pressing issues such as the Highway Trust Fund in a real, sustainable way.