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Congress passes tax reform bill that strengthens highway investment

Both the Associated General Contractors of America (AGC) and the American Road & Transportation Builders Association (ARTBA) applauded the House and Senate finance and trasnportation leaders for their support of the "American Jobs Creation Act" that includes important provisions to restructure the way ethanol-based fuels are taxed — as well as important reforms that will reduce and hopefully eliminate motor fuel tax evasion. The Joint Committee on Taxation estimates that these provisions will result in more than $24 billion invested in highway infrastructure over the next six years.

"Congress reconginized that the user fee system has worked well over the years to build and preserve our nation's highway infrastructure," says Stephen E. Sandherr, chief executive officer of the AGC. "The ethanol reform provisions that are included in the corporate tax bill will ensure that all highway users contribute the same amount toward maintaining and improving our roads and bridges. Not only will these provisions help to improve highway infrastructure, they will create nearly 1 million jobs over the next five years."

Currently, ethanol-blended fuels, such as gasohol, are taxed at 5.2 cents less per gallon than gasoline. In addition, 2.5 cents of the user fee on every gallon of ethanol-blended fuel goes into the general fund rather than being deposited into the Highway Trust Fund.

While these tax perferences were intended to make ethanol-blended fuels more attractive to motorists and thereby reduce America's dependence on imported oil, the Highway Trust Fund has lost tens of billions of dollars as a result. In effect, this preference has decreased the amount of funding that state departments of transportation receive from the federal government to help pay for road infrastructure improvements. U.S. DOT estimates that each $1 billion invested in highway construction generates 45,000 new jobs.

"The [senate leaders'] vision in this area will ensure that America continues to move toward 'home-grown' alternative energy sources to power the nation's motor vehicle fleet, thus reducing our depenedence on foreign oil — at the same time we're working toward meeting the nation's transportation needs," says Pete Ruane, ARTBA president and CEO. "These congressional leaders have also corrected a longtime tax inequity."

In addition to the ethanol language, the corporate tax bill aslo includes provions regarding fuel tax evasion and fuel fraud enforcement to ensure that all motor fuel taxes are deposited into the Highway Trust Fund.

President Bush signed the bill into law at the end of October.

TEA reauthorization postponed

According to Flexible Pavements of Ohio, Congress has again failed to enact a six-year transportation funding bill. TEA-21 expired over a year ago in September 2003. Federal transportation programs have been continued under a series of extensions of TEA-21. Most recently, Congress passed an eight-month extension bill to continue the TEA-21 highway and transit programs until May 31, 2005.

The eight-month extension bill, H.R. 5138, effectively provides states with two-thirds of their F.Y. 2005 funding, or $24.5 billion for highways and $5.2 billion for transit.

According to Flexible Pavements of Ohio, TEA reauthorization has become mired in election year politics and competing state interests. House and Senate negotiators had come close to agreeing on the final outline of a compromise package that would authorize nearly $300 billion for surface transportation programs through 2008. Uncertainty among the states over the impact of this funding level, which guarantees the states $284 billion over the six-year life of the package, coupled with other policy differences and the short time frame remaining before Congress returned home, scuttled efforts to finish work on the new program.

Association to mark 50th anniversary of highway system