|April 2, 2021
A Trillion Here, A Trillion There…
Former Illinois Senator Evert Dirksen is long credited with this quip about spending in Washington D.C., “A billion here, a billion there, pretty soon it begins to add up to real money.” An updated 21st century version of that quote would replace billion with trillion!
In March Congress passed a $1.9 trillion Covid relief bill. With the ink barely dry on that piece of legislation, conversations began about the next major bill, this one focused on infrastructure. As all MRF members know, Congress failed to pass a Highway Reauthorization bill in 2020 and extended the deadline to September of 2021. This was the bill in 2020 that had so many victories for motorcyclists, including wins on autonomous vehicles, motorcycle only check points and safety funding. It now appears likely that the Biden Administration and Congress will use the 2021 version of the highway bill as the mechanism to pass massive infrastructure spending before the end of the year.
President Joe Biden said Wednesday at an event in Pittsburgh, PA that his plan, “Will modernize 20,000 miles of highway, roads and main streets that are in difficult, difficult shape right now." Adding that, "I don't think you'll find a Republican today, in the House or Senate, who doesn't think we don't have to improve our infrastructure. They know China and other countries are eating our lunch. So, there's no reason why it can't be bipartisan again."
Transportation Secretary Pete Buttigieg insisted that the Biden administration will move swiftly to reauthorize the highway bill, which is set to expire in a little over six months. “We’ve got a clock on everything we’re doing,” Buttigieg said. “We’re not waiting until September in order to act. Conversations are taking place right now.” Speaker of the House Nancy Pelosi has set July 4th as a goal for passage of a House version of this legislation.
As we enter spring, congressional hearings are being scheduled about the scope and breadth of what this huge new bill will entail. We at the MRF will keep you updated as this enormous piece of legislation moves forward. We will fight to ensure motorcyclists priorities included in the 2020 version of the highway bill appear again in a 2021 version.
Where’s the Money Coming From?
One thing that seems clear is that any infrastructure package is going to cost a lot of money. In 2020 the House of Representatives passed version of the highway bill topped $1.5 trillion and President Biden’s 2021 infrastructure plan is in the neighborhood of $2.25 trillion. Of that $2.25 trillion, about $621 billion would go to items like road construction and repairs, mass transit improvements, passenger and freight rail modernization, investments in electric vehicles and airport upgrades. The remaining $1.6 trillion or so would go to items including the expansion of broadband, rebuilding the electric grid, drinking water projects and a laundry list of other items.
So, while Congress and the President may have the appetite for big spending, where will those dollars actually come from?
Nearly all highway funding comes from the Highway Trust Fund (HTF). Taxes on gasoline and diesel, which are the main support of the HTF, are fixed in terms of cents per gallon (18.3 cents for gasoline and 24.3 cents for diesel), and do not adjust for inflation or change with fuel prices. The rates were last raised in 1993. These taxes no longer raise enough money to support the programs Congress has authorized. In the last highway bill, the FAST Act, $70 billion was transferred from general government funds to the HFT to make up for the deficit. With the 2021 bill topping $2 trillion, the deficit between what the HFT has and what Congress spends will almost certainly be greater than in past years.
To close this deficit, Congress could cut spending, increase revenue or borrow the money. It’s clear that the first option of cutting spending is off the table. Both Republicans and Democrats have long championed spending on infrastructure as important to economic stimulation.
To raise revenue two main options have been debated. The first option is to raise the tax collected by consumers at the pump. On this topic U.S. Transportation Secretary Pete Buttigieg recently said that President Biden opposes raising the federal gasoline tax to pay for an infrastructure bill because it would violate his pledge to not raise taxes on middle-class Americans. “The President’s made a commitment that this administration will not raise taxes on people making less than $400,000 a year. That rules out approaches like the old-fashioned gas tax.”
The second option being debated to raise revenue is creation of a Vehicle Miles Traveled (VMT) tax. In its most basic sense, a VMT is tax based on how many miles a roadway user has traveled. Rep. Sam Graves (R-MO.), ranking member on the Transportation and Infrastructure Committee, said he thinks adequate technology is available to implement a VMT tax. “We can do it at the pump if we just do a simple formula,” he said, by using a national average for miles-per-gallon. “And it goes directly to the trust fund the same way it’s being done now.” Last week the U.S. Department of Transportation released a statement to reporters saying that the White House was not considering a VMT to fund infrastructure spending.
The most likely outcome is a direct transfer of funds from the U.S. Treasury to cover this proposed spending. In other words, revenue will be raised but through different tax increases or borrowing the money. Increases in the corporate tax rate as well as an increase on income taxpayers in the highest tax bracket have been floated as potential ways to generate revenue.
This spring and summer will see two monumental battles in Congress; first, how to improve our aging infrastructure and just as importantly, how to pay for it.