White House may rescind energy sector tax breaks to pay for infrastructure

The Obama administration's plan announced Labor Day to rebuild the nation's road, rail, and air infrastructure might be paid for by stripping the U.S. oil and gas industry of two separate tax breaks, a well-placed industry source said Tuesday.

In public, the proposal, which calls for an initial $50 billion investment to jumpstart the program, is short on details, especially when it comes to funding. In private, however, the administration is mulling the idea of raising revenue by barring the oil and gas industry from using tax credits designed to encourage domestic production, the source said.

In addition, the oil and gas sector would no longer receive credits for taxes it pays on earnings generated from abroad on top of the taxes it already pays in the United States, the source said.

Beyond that, there is little in the president's proposal, made during remarks at a Labor Day event in Milwaukee, for anyone to hang their hat on. Though Transportation Secretary Ray LaHood accompanied the president to the event, few, if any, inside the Department of Transportation had advance knowledge of the president's comments, the source said.

A business lobbyist said it would be difficult for the business community to get behind the proposal if it means singling out certain industries for adverse treatment. The lobbyist added, however, that it would be difficult to argue with initiatives aimed at improving the nation's aging transportation network while putting Americans to work.

The Labor Day proposal is one of a set of targeted initiatives totaling $350 billion that the president will reportedly outline in Cleveland on Wednesday to support the U.S. economic recovery and stimulate job creation.

Looking at the long term
In his remarks in Milwaukee, the president threw his support behind a six-year transport reauthorization measure to fund work to rebuild 150,000 miles of roads, build 4,000 miles of track for high-speed intercity passenger rail, and fix 150 miles of airport runways while rolling out a new-generation form of air traffic control technology.

Better known as the "Highway Bill," the reauthorization program has been surviving on a series of short-term extensions and has been receiving billions of dollars in transfer payments from the general treasury to remain solvent. The administration up until now had supported reauthorization but with a much shorter duration than six years. Rep. James L. Oberstar (D-Minn.), chair of the House Transportation and Infrastructure Committee, is seeking a six-year reauthorization.

"If we are to enjoy the benefits that come from a world-class transportation system, Congress must enact a long-term reauthorization that expands and reforms our infrastructure investments and returns the transportation trust fund to solvency," said a White House briefing paper.

In his speech on Monday, the president also proposed the creation of a National Infrastructure Bank to select long-term projects that would be paid for by public and private resources. Supporters of the plan say it would ensure projects were approved and funded based on their merit and cost-effectiveness, and end the traditional "earmark" process, where lawmakers seek funds for projects that generally benefit only their constituents and may be of dubious economic value.

However, getting congressional approval for the creation of such an institution would be difficult because many lawmakers would be reluctant to give up pursuing earmarks for their districts.