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DeFazio unveils plan to tie bond issuance for transport projects to inflation-indexed fuel tax hikes

Proposal would hike gas, diesel taxes by combined 1 cent a year, raise $500 billion by 2030, lawmaker says.

The ranking member of the House Transportation and Infrastructure Committee today unveiled a proposal to index federal taxes on gasoline and diesel fuel to construction-cost inflation. Under the plan, the Treasury Department would be directed to issue 30-year bonds that would finance transport infrastructure projects by bond repayments made using the indexing formula.

Rep. Peter DeFazio (D-Ore.) said his proposal would increase federal taxes on gasoline and diesel by a combined 1 cent per year and would not add to the federal budget deficit. Federal taxes on gasoline and diesel currently sit at 18.4 cents and 24.4 cents per gallon, respectively. However, neither tax has been raised since 1993, and they have since lost about 40 percent of their purchasing power due to inflation.


DeFazio has coined the proposal "Investing in America: A Penny for Progress." He said the plan would raise $500 billion by fiscal year 2030.

The proposal adds to the chorus of initiatives designed to raise funds for highway, bridge, and transit projects that virtually everyone says are needed. President Donald J. Trump has made infrastructure improvements a lead agenda item, and his administration has proposed spending up to $1.3 trillion through a variety of mechanisms, including the use of public-private partnerships and the repatriation of U.S. firms' foreign earnings at a much lower tax rate than the current corporate tax levy of 35 percent.

Trump's nominee for Secretary of Commerce, billionaire investor Wilbur Ross, favors billions of dollars in tax breaks to private investors to finance toll roads, toll bridges, or other projects that generate their own revenue streams. Last week, Senate Democrats unveiled their own 10-year, $1 trillion proposal to fund infrastructure projects directly through federal spending.

Freight interests have long supported an increase in the federal diesel fuel tax. Frederick W. Smith, chairman and CEO of Memphis-based transport and logistics giant FedEx Corp., said today that user fees should also be imposed to capture consumption-based revenue from electric and natural-gas powered vehicles that aren't covered by the diesel tax. However, few hold out hope for a hike in the motor fuels tax, noting the White House's aversion to any new taxes.

Smith testified at a House committee hearing on infrastructure issues, where DeFazio unveiled his proposal.

The congressman also reiterated his call for President Trump or Congress to free up about $9 billion in tax revenues sitting in the Harbor Maintenance Trust Fund so the funds can be used for port improvements. Currently, U.S. importers pay a Harbor Maintenance Tax (HMT) of 0.125 percent on the declared value of merchandise.

Established in the 1980s, the tax and its associated Harbor Maintenance Trust Fund are designed to pay for the U.S. Army Corps of Engineers' harbor maintenance projects, including dredging. However, the fund is running a multibillion-dollar surplus, which critics say is being used to help reduce the federal budget deficit instead of paying for needed waterway improvements.

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