The White House today unveiled a four-year, $302 billion proposal to fund the nation's surface transport programs with about half of the funding coming from changes to inventory accounting rules, tax incentives for U.S.-based firms to repatriate up to $2 trillion in overseas earnings, and an end to the 58-year-old ban on states tolling existing interstate highways.
The bill, called the "Grow America Act," includes $10 billion over four years to fund improvements to the nation's freight network. The bill would direct the Secretary of Transportation to award grants to public-private sector projects designed to improve the safe and efficient movement of freight.
"Despite its importance to the economy, freight investments are disadvantaged in the current transportation planning process," the Department of Transportation (DOT) said in a position paper. Freight programs compete with non-freight projects for public funds and community support, and inadequate coordination among government entities and private sector stakeholders have long stifled progress, the DOT paper said.
The proposed legislation "will give shippers, transportation providers, and freight workers a real seat at the table for making investment decisions," the DOT paper said. Freight tonnage moving throughout the country is expected to increase 62 percent by 2040, DOT predicted.*
Of the total funding, $152 billion will come from the traditional means of imposing excise taxes on diesel fuel and gasoline. The White House will not call for an increase in motor fuels taxes, which were last increased in 1993, despite calls by the nation's leading shipper and carrier groups and the U.S. Chamber of Commerce, to do so. It is highly unlikely that Congress, facing mid-term elections in November, will be willing to handle the political hot potato.
Much of the remaining $150 billion in revenue would be raised through changes in the "last in, first out" (LIFO) method of accounting for inventory, The technique is used to determine a company's cost of goods sold and thus its income earned. Under the LIFO method, the most recently produced items are recorded as being sold first. Businesses looking to reduce their tax liability have used the last sale price of inventory as a cost basis to determine taxable profit.
The White House, which has called LIFO an arcane formula used only in the U.S., has tried for years to repeal it. Most nations use the "first in, first out" (FIFO) accounting method where the oldest inventoried items are recorded as sold first.
The Administration will also address the need to incentivize U.S. firms to repatriate untaxed overseas earnings for the purpose of funding transportation programs. The Administration estimates that between $1 trillion and $2 trillion in U.S. corporate earnings are parked overseas. U.S. corporations are loath to repatriate overseas earnings due to the 35-percent corporate tax rate, the world's second highest after Japan.
Last May, Rep. John K. Delaney (D-Md.) introduced legislation to create an infrastructure fund seeded by the sale of $50 billion in very long-term bonds. U.S. corporations would be encouraged to buy the bonds by repatriating, tax free, part of their overseas earnings for each dollar they invest, under the Delaney proposal.
In mid-April, Peter Rogoff, DOT undersecretary of transportation policy, told the NASSTRAC annual conference in Orlando that the Administration takes a dim view of the Delaney proposal because it is unsure if it would raise sufficient venue to fund high-cost infrastructure projects.
These and other proposed tax changes would generate about $150 billion in one-time savings designed to fund infrastructure programs beyond fuel tax receipts, according to the Administration.
TOLLING BAN LIFTED?
The ban on states' tolling existing interstates has been in place since Congress created the interstate system in 1956.
The federal government allows tolling on new highways and on lanes added to existing interstates as long as the revenue
is used for repair and maintenance of the tolled road.
The White House proposal said that states should be allowed the flexibility to toll existing interstate highways that run within their borders. The trucking industry and businesses located along interstates have long opposed the concept, calling it an inefficient and ineffective way to raise revenues.
The White House proposal comes four months before the Highway Trust Fund, which collects the excise taxes to fund the wide range of transportation projects, is expected to run out of money. The current funding law, known as MAP-21, expires at the end of September. Rogoff warned at the NASSTRAC conference that unless a new law is passed or an extension of the current law is authorized by the August summer recess, the federal government would be forced to withhold matching funds reimbursement to the states.
The proposal is the first time the White House has offered legislation to fund the country's surface transport programs.
Editor's Note: A previous version of this article incorrectly stated that freight tonnage was expected to increase by 62 percent by 2020.
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