WASHINGTON – U.S. Senators Christopher Murphy (D-CT) and Bob Corker (R-TN) are proposing a 12-cent increase in the federal gas tax to pay for the renewal of highway and transit programs, which could run out of funding by the end of the month.
“Reaction on the Democratic side has been positive,” said Murphy, who noted he spoke with Senate Majority Leader Harry Reid (D-NV) and Senate Finance Chairman Ron Wyden (D-OR) about the plan, as reported by Roll Call.
“I think on our side of the aisle we recognize that it’s time to stop talking theoretically and start talking really in practical terms,” Murphy said, adding that bipartisan support is key to getting the plan through the chamber.
But it’s unclear if a substantial number of the Republican Conference will embrace the idea. One big GOP selling point was that the tax increase would not violate the Americans for Tax Reform pledge if it is paired with a provision making some popular tax breaks that are typically part of the tax extenders package permanent.
That list of tax breaks includes: the research and development tax credit; Section 179 expensing, a tax break encouraging small businesses to by business equipment; the deduction of state and local sale taxes; the deduction of up to $250 in classroom expenses that teachers paid for out of their own pocket; a subsidy for mass transit and benefits given for land donated for conservation purposes.
The 12-cent gas tax increase is estimated to raise $164 billion over 10 years. Using the tax break extension to offset a gas tax increase would, however, take away the ability to use those same tax breaks to buy down tax rates as part of a future tax reform package. The White House has threatened to veto permanent tax cut extensions, but it’s not clear if they would oppose them if paired with a gas tax hike.
Along with raising the federal gasoline and diesel taxes by six cents in each of the next two years for a total of 12 cents, the plan would also index the gas tax to inflation, using the Consumer Price Index to ensure that it remains viable into the future.
The plan would raise enough to provide enough funding to offset current MAP-21 spending levels over the next 10 years and replace all of the buying power the federal gas tax has lost since it was last raised in 1993.
The White House has not backed a gas tax hike previously and has instead proposed using short-term revenue from corporate tax reform to pay for the highway bill.
The two senators hope to build support for the plan over the summer. “We haven’t introduced it as formal legislation yet because we acknowledge that ultimately this is going to be passed as part of a package coming out of the Finance Committee and Energy and Public Works Committee,” Murphy said, as reported in Roll Call.
They don’t expect any action until after the elections. In the meantime, they believe Congress will pass a short-term patch to keep transportation programs funded through the end of the year.