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Senate struggles to pay for highway programs

Traffic on the eastbound Interstate 894 ramp to Interstate 94 passes ongoing construction work in the Mitchell Interchange on Jan. 31 in Milwaukee. The Senate is expected to take up a bill Thursday to extend federal highway and transit programs. (Staff photo by Kevin Harnack)

By Joan Lowy
Associated Press

WASHINGTON — The Senate will take up a bill Thursday to extend federal highway and transit programs even though Democrats still were struggling to find a way to pay for the programs.

The Senate Finance Committee approved a measure that raises about $10 billion to make up a shortfall between the $109 billion in spending authorized by the transportation bill and the amount of money projected to be raised by federal gasoline taxes, the principal source of highway money.

The $10 billion would be raised over 10 years even though the transportation bill lasts only two years. The actual amount needed in those two years to make up the shortfall is less than $6 billion, but that would leave highway and transit programs without a financial cushion in case gas tax revenues turn out to be less than anticipated.

Instead, the bill would provide the cushion from money raised in later years. That drew complaints from several Republican members of the committee, who said the plan spends money that hadn’t been raised.

Sen. Max Baucus, D-Mont., the committee’s chairman, also promised Republicans he would work with them to find a replacement for a provision that changed how inherited Individual Retirement Accounts were taxed before the Senate votes on the transportation bill. That provision would raise an estimated $4.6 billion over 10 years, about half the money the committee is trying to raise over 10 years.

“I do believe there are ways to skin this cat — that is, to find the revenue another way, not with this provision,” Baucus said.

Republicans had complained that there was no connection between the retirement accounts and highway programs, and that the money raised by the provision might be needed later when Congress takes up estate tax legislation.

In the House, Republicans have yet to fully explain how they plan to pay for a shortfall of more than $50 billion over the 4-1/2-year life of their $260 billion transportation bill.

Part of the reason the Democratic-controlled Senate and the Republican-controlled House have been scratching to find a way to pay for popular highway programs is that neither party is willing to raise federal gasoline and diesel taxes or increase some other tax or fee to underwrite the cost. Hiking taxes, especially in a weak economy, widely is viewed as politically dangerous.

But Sen. Mike Enzi, R-Wyo., and Sen. Tom Coburn, R-Okla., two of the Senate’s more conservative members, surprised transportation lobbyists by saying they were willing to raise fuel taxes. Enzi offered, and then withdrew, an amendment to index the 18.4-cent a gallon federal gas tax and the 24.4-cent a gallon federal diesel tax to inflation.

“I’ve mentioned several times this is a very sensitive thing and that politically it’s not feasible to do that now,” Enzi said. But he added: “I think it’s the responsible way to go.”

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