Gas-tax aversion is tying Congress in knots

at 02:34 PM ET, 11/08/2011

Right now, the House and Senate are trying to extend federal transportation funding — the money that goes to build and rebuild roads and bridges — for the next few years. Both chambers are grappling with the same dilemma. Americans have been cutting back on driving lately. That means there’s not enough gas-tax revenue to pay for the highway bills. Yet no one wants to raise the gas tax. And that means that legislators have to devise ever-more byzantine — and often problematic — ways to rustle up funds.

(David Paul Morris/Bloomberg)
In the House, the Republican leadership has been hunting around for more money after its initial six-year, $230 billion highway bill was blasted for cutting spending 33 percent below existing levels. Recently, Speaker John Boehner hinted that Republicans had found a solution: They’d use royalties from new oil and gas drilling to help bankroll a bigger infrastructure bill. (Boehner’s office hasn’t released details, but two House members have introduced proposals along these lines.) The problem, critics say, is that this could make a mess of infrastructure spending.

For one, oil and gas royalties are currently used to fund other parts of government. “This is revenue that’s supposed to go to the general fund,” says Steve Ellis of Taxpayers for Common Sense. So if the bill just uses existing royalties, it will increase the deficit. Granted, it’s possible that tying energy production to infrastructure will foster more drilling than would otherwise be the case — let’s say it somehow spurs Florida to open up its coasts to oil and gas development, bringing in more revenue than anticipated. But, Ellis notes, that’s a big if. “They’re taking revenues way down the road, speculative at best, to pay for roads and bridges we’re building right now.”

The Senatedoesn’t get off lightly, either. Senate Democrats are hunting around for about $12 billion to supplement gas-tax revenue and fund their highway bill, which would maintain spending at current levels for two years. (Originally they were going to use some agreed-on savings in the health reform law, but those were swiped away to pay for a contractor withholding provision.)

But even if the Senate does find this extra money, the Senate’s bill would bring the balance of the Highway Trust Fund down to zero over the next two years. And that, Ellis explains, is a risky move. Congress did the same thing in its 2005 highway bill, despite ample warnings that existing gas-tax revenue could come in below expectations. In the end, the worriers were right and Congress had to chip in an extra $34.5 billion from the general fund to maintain highway spending. The current bills, Ellis notes, also leave no margin for error. If, say, the price of oil shoots up unexpectedly and Americans start driving less, there won’t be money to fund all the planned infrastructure.

And true, Congress could avoid many of these elaborate contortions if a gas tax hike were on the table and the Highway Trust Fund could get replenished. But it’s not.

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