Congress

Ambitious infrastructure plan hits reality check: How to pay for it

Disagreements illustrate how difficult it will be to bring plan to fruition

Rep. John B. Larson, D-Conn., leaves the Capitol on Feb. 28, 2019. (Bill Clark/CQ Roll Call file photo)

On Wednesday morning, House Democrats presented an ambitious vision for a massive infusion of federal dollars in the nation’s infrastructure. 

By Wednesday afternoon, members of the House Ways and Means Committee illustrated how difficult it will be to bring that plan to fruition.

Democrats and Republicans on the panel agreed on the need for billions of dollars of investment into the nation’s highways, bridges, waterways, drinking water systems and other infrastructure. But they are nowhere close to agreeing on how to pay for that investment.

“There’s great agreement up here until it comes down to how do we pay for this,” said Rep. John B. Larson, D-Conn., during a hearing on how to pay for infrastructure investment. “Then it becomes the dance of the tarantulas because one side doesn’t want to commit — because if they stick their head too far out, the other side will lop it off.”

While the two parties seem supportive of ancillary financing tools such as bonds and tax credits, the largest chunk of infrastructure is paid for through user fees. Key among those is the Highway Trust Fund supported by federal fuel taxes.

The federal government has not fundamentally changed how it pays for the federal highway system since its creation in 1956. And the fuel taxes it relies on have remained fixed at 18.3 cents per gallon of gasoline and 24.3 cents per gallon of diesel since 1993. 

But as cars have become more fuel-efficient, revenue from that tax has declined, and the government has had to dip into general revenues to pay to maintain highways and transit. Since fiscal 2008, those transfers have amounted to more than $140 billion. 

States have tried to make up for the shortfall. According to the Institute on Taxation and Economic Policy, some 31 states have raised or altered their gas tax structure this decade, including by embracing a variable-rate gas tax structure.

‘Dying’ tax

Now, the fundamental debate over infrastructure may come down to whether to increase the gas tax or abandon it for another system entirely. 

“The gas tax is a dying tax,” said Rep. Tom Reed, R-N.Y.

Republicans, including House Transportation and Infrastructure ranking member Sam Graves, have largely embraced a model that would charge users based on miles traveled. Democrats are open to such a model but say the technology is not ready to be implemented.

The battle is a repeat of one that has occurred in recent years when the federal government has had to renew its surface transportation program. And at least for the last few bills, Congress maintained the status quo by dipping into general funds.

“This is the same stuff we’ve been talking about and talking about and talking about,” said Rep. Bill Pascrell Jr., D-N.J.

But if House Democrats get their way this year, the highway bill would be bundled with broadband, water infrastructure, airports and other programs under a five-year, $760 billion infrastructure package outlined Wednesday by House Democratic leadership. Highways would account for $329 billion of that.

Other funding sources

The highway trust fund, which also pays for transit, is not the only funding stream for infrastructure, and the Ways and Means panel is also looking at a myriad of other financing mechanisms.

Among those could be restoring Build America Bonds, taxable municipal bonds created as part of the American Recovery and Reinvestment Act of 2009. That two-year program authorized state and local governments to issue special taxable bonds to finance $182 billion in new infrastructure investment in 2009 and 2010, according to the Brookings Institution. Among those who have suggested resuscitating the bonds are Ways and Means Chairman Richard E. Neal, D-Mass. 

Witnesses also brought up public-private partnerships, New Market Tax Credits and Opportunity Zones.

“There are virtually infinite sources of potential revenue,” said DJ Gribbin, founder of Madrus LLC, a consulting firm focused on infrastructure.

Diane Gutierrez-Scaccetti, commissioner for the New Jersey Department of Transportation, called the gas tax a “foundational tool” for the interstate highway system. She pleaded for the panel to index the tax to inflation.

“Please do not abandon the gas tax,” she said. 

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