GOP, Democrats Trade Places on Drivers Paying for Infrastructure
(Bloomberg) - The debate over paying for the country's roads, bridges, and transit systems is leading some normally tax-hostile Republicans to impose higher levies on motorists - even a new one based on kilometers traveled instead of fuel purchased.
But some Democrats who supported the idea of charging a mileage charge are now against it. They see infrastructure as a stimulus measure and want to pay for it with corporate taxes.
This change of position leaves Washington observers scratching their heads.
"If you took those positions and went back 10 years, you'd say, 'What?'" Said Adrian Moore, vice president of policy at the Reason Foundation, a libertarian think tank.
The debate over whether drivers or corporations should pay the bill threatens to bring down negotiations between President Joe Biden and the Senate Republicans for a massive infrastructure plan. Biden pulled out of one-on-one talks with West Virginia Republican Senate Shelley Moore Capito, but the White House said he was still engaged to a separate, non-partisan group of senators, despite some Democrats agitating for their party to go alone .
Although the president is in the UK for the Group of Seven summit, the bipartisan group's Democrats went to the White House on Thursday. "Questions need to be addressed, particularly the details of both policy and pay," said Andrew Bates, a White House spokesman.
Indexing the gasoline tax - currently 18.4 cents a gallon - to a measure of inflation has been discussed by the bipartisan group working on a compromise plan, said Mitt Romney, a Republican from Utah who played a prominent role in those talks. He said it wouldn't make a lot of money.
Dick Durbin, the No. 2 Democrat in the Senate, said Thursday he is in favor of indexing the gas tax. However, it is unclear whether the White House would support such a move.
Just two months ago, Transport Secretary Pete Buttigieg said the Biden administration was considering the so-called vehicle mileage tax to pay all motorists to maintain the roads. The VMT has the advantage that it would offset losses in the federal gas tax due to the increasing sales of electric cars.
But the White House has since reversed course, saying it would violate Biden's promise not to raise middle class taxes.
"I work hard to find common ground with Republicans when it comes to the American job plan, but I refuse to raise taxes on Americans who earn less than $ 400,000 a year," Biden tweeted on Am Tuesday. "It is long time that the rich and corporations pay their fair share."
Democrats have leaned on the idea of raising taxes on large corporations, including some whose taxes were lowered during the Trump administration.
"There is no evidence to support this view that cutting taxes for the rich is good for the economy," said Senator Sherrod Brown, an Ohio Democrat, on Wednesday. "They'd rather hike the gas tax on the $ 60,000 a year than a $ 300 million a year hike their income tax."
Republicans as opposed to
Republicans have resisted raising corporate taxes to pay for roads.
"If you look at the past 30 years that we've passed bipartisan infrastructure laws here in Congress, they've always been based on user fees," said Rep Darin LaHood, a Republican from Illinois, during a May 19 hearing on the Roads and Roads Committee Funds of the house.
“Instead, we're talking today about redirecting tax legislation and increasing corporate tax rates to finance infrastructure,” he said.
Texas Republican Senator John Cornyn proposed last month a 25 cents tax on every mile driven by heavy trucks to raise $ 33 billion a year - about the same as the fuel tax.
Truckers objected immediately.
"We're not against VMT," said Bill Sullivan, executive vice president for advocacy for the American Trucking Associations, which advocate for large haulage companies. "What we vehemently reject is this 'let's just do this for trucks' idea."
Republicans who opposed previous efforts to increase the gas tax or move to a mileage charge argued that doing so would disproportionately affect people on low incomes, said Greg Regan, president of the AFL-CIO's Transportation Trades Department. Well, it is the Democrats who are making that argument and the GOP who are proposing that user charges should be used to pay for roads and transit.
Ed Mortimer, vice president of transportation and infrastructure for the US Chamber of Commerce, attributed the Republicans' changing position on user charges to their accustomed view of electric vehicles as a blue state phenomenon. So, he said, they ignored warnings of a gas tax loophole - until Republican-led states began lowering their fuel taxes.
"Some Republicans, who may have been reluctant about user fees, may have a different perspective when it comes to a user fee increase or corporate income tax," Mortimer said.
Sam Graves of Missouri, the top Republican on the House of Representatives Transportation and Infrastructure Committee, has argued that a VMT could easily be implemented using a formula that is rated at the pump, much like the fuel tax.
Such a fee would also help prop up the highway money. Gasoline and diesel taxes leave out a whole new category of drivers on the road - drivers of electric vehicles. Funders say it will help bridge the federal highways funding gap. The gas tax brings in $ 34 billion a year, while federal spending on freeways and public transportation has exceeded $ 50 billion annually.
"The proposal is that middle class workers will pay what mega-corporations don't pay," said Democrat Ron Wyden, chairman of the Senate Finance Committee, during the infrastructure finance panel hearing in May. "This is not a step towards fairness."
Wyden said he would look at any gasoline tax indexing proposal, as Romney said, before commenting on it. He pointed out that Biden had a "reservation as a regressive tax" and highlighted the democratic view that companies are now underpaying taxes.
Senator Chuck Grassley, a veteran Republican from Iowa, noted Thursday of the levy indexing that "it's better than hike the gas tax and has a better chance of getting it done." He also said that if this had been done in the early 1990s "we would not be in the situation we are in now".
While freeway funding is expected to be part of the infrastructure plan, Congress is still working on a stand-alone bill to replace a five-year $ 305 billion bill that was extended to September 30. $ 494 billion for land transportation in July 2020, but the measure was not approved by the Senate. The Democrats in the lower chamber have tabled a land transport bill worth $ 547 billion. The Republicans in the House of Representatives countered with a smaller measure of $ 400 billion.
Former US Secretary of Transportation Rodney Slater, who served in the Clinton administration, said the last increase in gas tax to 18.4 cents a gallon from 14 cents a gallon in 1993 was linked to federal efforts to reduce the deficit. It was passed without a Republican vote.
It wasn't until 1998 when the additional 4.3 cents per gallon was dedicated to the Highway Trust Fund, Slater said.
Slater said thought about a possible replacement for the gasoline tax, including a mileage charge, dates back to the Clinton years. He cited the creation of the Transport Infrastructure Financing and Innovation Act program and the financing of rail rehabilitation and improvement in 1998 in addition to the early VMT explorations.
"We tried to go for a VMT deployment," he said. “We realized that we couldn't rely on the gas tax alone to finance the transport. We started researching innovative finance techniques. "
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