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Details of Possible Federal Infrastructure Package

 

In July, outgoing House Transportation and Infrastructure Committee Chairman Bill Shuster (R-PA) released draft legislation which calls for phasing in a 15-cent gasoline and 20-cent diesel tax increase over three years to ensure that the Highway Trust Fund (HTF) stays solvent over the next decade. After three years, the taxes would be indexed to inflation. However, at a White House event this week, Transportation Secretary Elaine Chao said that all options are on the table regarding how an infrastructure package would be funded. She stated that the Trump administration is considering an increase in the federal motor fuels excise tax, while Democrats may consider a carbon tax.

Although many Democrats have advocated for a carbon tax, a Republican, Rep. Carlos Curbelo (R-FL), formally introduced the “Market Choice Act,” (H.R. 6463) in July which would replace the federal motor fuels tax with a $23 per ton economy-wide carbon tax on emissions from oil refineries, gas processing plants and coal mines beginning in 2020. The bill would also direct 70 percent of revenues to the Highway Trust Fund and includes a border adjustment tax (BAT) meaning fees could be assessed on imported products from countries without a carbon tax and outlines various points of taxation, among other provisions, that would have far reaching economic impacts across numerous sectors. PMAA has serious concerns with this carbon tax legislation because the cost will not be readily visible to the public and it would likely put EPA in charge of who pays into the Highway Trust Fund.

Meanwhile, Chairman Shuster’s draft bill would begin taxing infrastructure users that can currently avoid taxation such as a 10 percent user fee on electric batteries and adult bicycle tires and would also eliminate full and partial fuel tax exemptions for public transit and intercity buses. Furthermore, the legislation would create a voluntary pilot program to test the feasibility of a vehicle miles traveled (VMT) to replace the federal motor fuels excise tax. Ways to track mileage would possibly include: phone apps, in-car diagnostic systems, etc. By having a VMT and/or the provision included in the draft bill that would tax electric vehicles (EVs), the legislation is a conversion starter to ensure that all highway users pay their fair share. Currently, EVs are exempted from paying any type of highway tax.

Fortunately, the draft legislation does not include language that would commercialize rest areas or allow existing highways to be tolled. Keep in mind that the Trump administration called for ending the federal prohibition on tolling existing highways and commercializing rest areas.

If Democrats take back the House, a potential Highway bill may be one of the few issues that both parties may be able work across the aisle.

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