DeFazio Unveils Proposal to Alter Fuel-Tax System

This story appears in the June 16 print edition of Transport Topics.

WASHINGTON — Rep. Peter DeFazio (D-Ore.) introduced a bill last week to replace the federal gasoline tax with a barrel tax on oil, eliminate the sales tax on truck tires and index the diesel tax to inflation.

DeFazio unveiled his proposal at a “Rally For Roads” June 11 on the National Mall, one of two large gatherings here of labor, road builders and business groups pressing Congress to save the Highway Trust Fund.

The fund is expected to become insolvent in July, and reimbursements to states may slow or stop for work already under way. In addition, the current transportation spending law, MAP-21, expires Sept. 30.

The nation’s infrastructure is worn out, DeFazio told the crowd of about 300.

“You know better than I that America is falling apart and we’re falling behind,” he said. “Most every other country in the world gets it; if you rebuild your infrastructure or if you build a 21st century infrastructure, you’re going to be able to compete in a global economy.”

At the rally, Sen. Barbara Boxer (D-Calif.) told the crowd that Congress has known for years that the trust fund is running out of money, so there’s no excuse for not acting to solve the problem.

“We need a long-term solution,” said Boxer, chairwoman of the Senate Environment and Public Works Committee, which presented a six-year transportation reauthorization plan in May.

She reiterated that she favors replacing per-gallon fuel taxes with a wholesale fuel tax.

The 18.4-cent levy on diesel and the 24.4-cent gasoline tax produce the revenue for the trust fund, although some revenue is also generated by the tax on truck tire and vehicle sales.

A day earlier, Transportation Secretary Anthony Foxx urged an annual gathering of contractors to get behind President Obama’s four-year, $302 billion plan to pay for roads and bridges via corporate tax reform.

“We shouldn’t be here talking about the fact that, by August, the Highway Trust Fund is going to be insolvent, that we’re going to lose 700,000 jobs . . . as a result,” Foxx said.

Meanwhile, DeFazio told Transport Topics that under his bill, introduced June 12, eliminating the excise tax on tires would save carriers an average $350 a year. And a $6.75 tax on a barrel of crude oil, indexed to inflation and fuel-economy standards, he said, would pump about $314 billion into the trust fund over 10 years.

DeFazio said his plan for indexing the diesel tax to inflation and fuel-economy standards would take into account the inflation factor since the tax was last increased — in 1993.

The first year of the change would put the diesel tax at 26 cents a gallon and, after indexing for 10 years, the tax would be at about 47.4 cents a gallon, said DeFazio, whose plan calls for a six-year funding bill.

Senate Finance Committee Chairman Ron Wyden (D-Ore.) did not say he was supporting DeFazio’s plan, but at the rally, he told the crowd that about 84% of the nation’s oil consumption is for transportation.

Wyden’s committee is tasked with finding a way to fund the six-year transportation bill the EPW committee is advancing and also tasked with finding a short-term fix for the trust fund.

“If you put the brakes on thousands of construction projects . . . that’s going to be a huge economic multiplier that hurts our country,” Wyden told the crowd.

The House has yet to come up with a transportation bill, but the Republican leadership has suggested eliminating Saturday mail delivery to shore up the trust fund until next May. Wyden said after the rally that using money from the cash-strapped U.S. Postal Service to shore up the trust fund is a “head scratcher” of an idea.

Rep. Tom Petri (R-Wis.) told the rally that the revenue flowing into the trust fund is equal to only about 60% of what’s being drawn down to pay for projects and that Congress has been taking only short-term measures to meet the problem.

“The time is fast approaching when we’re going to have to end that, get serious and pass a real surface transportation reauthorization bill,” said Petri, chairman of the Subcommittee on Highways and Transit.

Rep. Earl Blumenauer (D-Ore.) was the only person at either event who called for increasing per-gallon fuel taxes. He has previously introduced a bill to do so.

He said the best time to raise federal fuel taxes would be in the lame-duck session after the November election, when 10% of the Congress will be retiring or “somebody comes up with something better.”