Highway funds decline, Congress seeks new sources

WASHINGTON (Reuters) - Funding for U.S. highway repairs has been declining for years, but with another shortfall in the trust account for the country's roads and bridges looming, and with the law authorizing that account set to expire soon, lawmakers are urgently digging for new money sources.

They are mostly debating raising the gasoline tax, which is levied on every gallon sold in the United States and provides money for the Highway Trust Fund.

President Barack Obama has stated the tax cannot be raised during a recession, while members of Congress cite a comprehensive study conducted last year that found indexing the tax to inflation for gradual increases is crucial to keeping the fund afloat.

But on Thursday, members of Congress, along with policy experts and industry leaders, aired other ideas in a hearing before the House of Representatives Ways and Means Committee.

"While much of the debate so far has focused on raising the gasoline tax...I will highlight ways to generate the necessary revenue, including bonding, a fee on barrels of crude oil at the refinery, and a tax on crude oil securities transactions," said Oregon Representative Peter DeFazio, who is helping write the new law authorizing transportation repairs and building.

DeFazio said the 18.4 cent per gallon gas tax has lost purchasing power by 33 percent since 1993, the last time the tax was raised.

The Democrat would like the federal government to issue 10-year bonds totaling $50 billion to $60 billion to be repaid by an increase in the gas tax that would be linked to the construction cost index. Because the index is currently flat, any rise "would be delayed until the economy improves."

A $1 fee per barrel of crude oil would generate $24 billion in revenue over six years, while "enacting a minuscule transaction tax on speculative crude oil trading," would likely raise $190 billion, DeFazio said.

"Since the tax is on speculation only, it deters speculation and undermines much of the crude oil price bubble," he said. "It is the only revenue source that lowers the price of oil while raising revenue for the Highway Trust Fund."

Rep. James Oberstar, who chairs the Transportation Committee and is also authoring the new highway law, said the federal government could pay back money it has taken from the fund for emergency relief and vehicle safety programs.

The Highway Trust Fund could also be allowed to earn interest on its cash balances, garnering $20 billion, he said.

In addition, Congress could consider other so-called "user fees," such as taxing vehicles weighing 55,000 pounds or more and moving to a tax based on miles driven, known as vehicle miles traveled.

The representatives have drafted a $450 billion six-year transportation bill to replace the current one that expires at the end of September. The Ways and Means Committee will draft the part of the bill that deals with funding sources.

Obama and members of the Senate, though, say the bill will not be done in time and have suggested extending the current highway plan for more than a year. Obama has also called for Congress to transfer $20 billion from general revenues into the fund to cover the extension and the shortfall that is projected to emerge at the end of summer.

Oberstar has said Congress could transfer a smaller amount and pass the new bill faster. DeFazio said the new highway plan would need $140 billion more in revenue than the current one.

At the hearing Rep. Kevin Brady proposed creating an infrastructure tax credit to help attract private capital for railroads. He also suggested allowing state and local governments to issue more private-activity bonds, tax-exempt debt for activities outside of usual civic works.

Transportation Undersecretary Roy Kienitz told the hearing the gas tax is vulnerable to changes in fuel prices and driving, but did not provide details on Obama's thinking.

Simply, he said, transportation money should be invested "more efficiently."

(Reporting by Lisa Lambert)