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Congress Rules Out Gas Tax Hike, Agrees On Little Else At Highway Hearings

Lawmakers are adamant they will pass a long term highway bill, but they are equally insistent on promoting their own, disparate proposals.

“A long-term, bipartisan solution to this dilemma will be difficult to achieve and, some days, it almost seems out of reach,” Senate Finance Committee Chairman Orrin Hatch said at a committee hearing Thursday, but “my goal as chairman of this committee is to find a way to fund a long-term infrastructure bill.”

Congress has until July 31 to come up with a solution. After that, the Highway Trust Fund (HTF) will no longer have enough money to meet all of its obligations. (RELATED: Rep. Delaney Seeks Bipartisan Support for Highway Funding Bill)

The HTF is the primary vehicle for federal transportation spending, and is funded by a tax on gasoline and diesel fuels. Revenue from gas taxes only provide about 60 percent of the $50 billion disbursed annually by the HTF, however, and Congress has responded by filling the gap with monies from the general fund, passing 33 such short-term extensions in the last six years.

Hatch blamed Democrats for the continued impasse, pointing out that, “Between the 110th and 113th Congresses, when the Democrats controlled the Senate, we enacted 11 short-term highway extensions.” In contrast, he added, “when Republicans were in the minority, we didn’t turn the struggles over highway funding into a political football.”

Now that they are in the majority, though, Republicans will need to reconcile competing proposals from their own party, which would likely entail winning some Democrats over to one of the GOP plans.

Many Democrats, including Transportation Secretary Ray LaHood, favor raising the 18.4-cent-per-gallon federal gas tax to fund a long-term highway bill, arguing that inflation and improvements in fuel efficiency have taken a major toll on revenues since the tax was last raised in 1993. (RELATED: Highway Trust Fund Almost Broke, Senators Propose Gas Tax)

Republicans, for their part, are torn between several proposals, though they are generally united in opposing any increases in the gas tax.

“I want to make very clear: I’m against raising the gas tax,” House Ways and Means Committee Chairman Paul Ryan said at a committee hearing Wednesday. “We are not raising gas taxes—plain and simple.”

Not only would increasing the federal gas tax threaten the still-fragile economy, Ryan said, it would also be less effectives than advocates claim, because people are driving less and using more fuel efficient vehicles.

One alternative solution, favored by both Republican Rep. Paul Ryan and President Barack Obama, would finance a long-term funding patch through a so-called “repatriation holiday.” The scheme involves giving American companies a window during which they could repatriate foreign earnings at a reduced tax rate. (RELATED: Repatriation Holiday Won’t Fix Highway Funding Shortfall, Critics Say)

Supporters say a repatriation holiday would create a sudden infusion of cash for the government while also boosting domestic investment, but opponents contend that revenue projections are overly optimistic.

Another possibility, which was proposed in the previous Congress by Republican Sen. Mike Lee and received the support of economist Stephen Moore at Thursday’s Senate hearing, calls for devolving responsibility for transportation funding to the states. (RELATED: Mike Lee Would Send Highway Funds to the States)

Under Lee’s devolution plan, the federal gas tax would actually be reduced over five years to just 3.7 cents per gallon, which Lee claims would leave Congress with “enough revenue to continue to maintain the Interstate Highway System,” while giving states the freedom “to launch a new era of local investment and local innovation.”

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