Foundation

Taxpayer's Tab: Highway Funding Bill Fills Potholes With Taxes

by Dan Barrett, Michael Tasselmyer / /

Cutting the Federal Workforce
Vol. 6 Issue 8, February 26, 2015

 

This week, NTU Foundation scored legislation concerning infrastructure funding, the latest developments in email privacy efforts, and the fiscal impact of a single agricultural program subsidy. In this week’s edition of The Taxpayer’s Tab, we’ll take a look at each of these bills and how they might impact federal spending. A complete list of the bills to date with cost estimates is available in this spreadsheet.

Most Expensive

The Bill:
 H.R. 625, the Infrastructure 2.0 Act

Cost Per Year: $22 billion ($110 billion over five years)

Every time you swipe your credit card to fill your car’s tank with gasoline, you pay a federal gas tax of 18 cents per gallon (24 cents if you buy diesel) that gets deposited into the Highway Trust Fund. The tax dollars are used to build, maintain, and repair the country’s vast network of interstate roads and mass transit systems (as well as squirrel sanctuaries and bike paths).

In recent years, though, the Fund has teetered on the brink of insolvency, with funding expected to run out by May 31 without legislative action. The gas tax brings in about $34 billion of revenue per year, but the cost to maintain federal transportation infrastructure is nearly $50 billion annually. The deficit is reinforced by what has been a positive development for American drivers: as cars become more fuel efficient, drivers can go further on a single tank of gas. That has led to lower gas tax revenue even as road usage remains high. The Congressional Budget Office (CBO) projects that under current law, the Highway Trust Fund will face a $168 billion shortfall by the end of the next decade.

While Congress has passed several short-term funding bills to temporarily address the problem, a comprehensive solution has yet to garner bipartisan support. Rather than looking for ways to restrain spending in alignment with available resources, the President, many in Congress, and outside interest groups are looking for ways to raise more revenues for the Trust Fund. Higher federal gas taxes would certainly provide more funding, but that option is politically unpopular. As an alternative, Congressman John Delaney (D-MD) has introduced H.R. 625, which would instead reform existing tax law – specifically, those related to international corporate earnings – in order to finance $170 billion worth of infrastructure projects.

Rep. Delaney’s Infrastructure 2.0 Act would institute a one-time, 8.75 percent tax on overseas profits held by U.S. multinational firms. As NTUF noted in a recent report, the U.S. corporate income tax rate is well above the average of other developed nations, which incentivizes multinational corporations to shift some of their profits to lower-tax jurisdictions overseas. 
Some estimates suggest nearly $1.9 trillion in such profits are held overseas. About $120 billion of the revenue from this new tax would go into the Highway Trust Fund over the next six years, and another $50 billion would be used to create a new American Infrastructure Fund dedicated to offering loans and guaranteed bonds to state and local governments’ infrastructure projects. H.R. 625 would also establish a $25 billion Regional Infrastructure Accelerator pilot program to help state and local agencies establish financing priorities and strategies for their infrastructure projects.

The $195 billion would, over the next six years, represent an average annual increase of $22 billion above the current $11 billion authorized in the most recent stopgap infrastructure bill. The White House also recently touted corporate tax revenue as a “reliable” source of funding for the $478 billion in projects the President has planned. His latest budget proposal includes a one-time 14 percent tax on corporate income held offshore to raise $268 billion.

The sponsor said in a press release that “the Infrastructure 2.0 Act is the new policy solution we need to break the legislative gridlock that’s created clogged highways, crowded runways and costly delays for entrepreneurs and workers. With a looming Highway Trust Fund crisis ahead of us, it is clear that we need a new answer.”
The Bottom Line: The Infrastructure 2.0 Act would institute a one-time, 8.75 percent tax on overseas corporate profits in order to finance $22 billion of transportation-related infrastructure improvements over the next six years.
 
Least Expensive

The Bill:
H.R. 892/S. 463, the Harvest Price Subsidy Reduction Act

Savings Per Year: $1.4 billion ($7.0 billion over five years)

When thinking of iconic American symbols, the image of an independent farmer tending to his crops usually comes to mind. Agriculture has been a cornerstone of our social and economic culture ever since Native Americans taught the Pilgrims to plow and fertilize the tough Massachusetts soil, leading to boundless cotton fields in the South, cornfields across the Midwest, and orange groves along the west coast. 

Since the 1930s, the government has supported the agriculture sector in a number of ways. Though initially farmers were protected behind trade barriers, such as tariffs, and direct payouts that would pay farmers with tax dollars to plant – or not to plant – staple crops, the modern support system is a mix of three payment systems:
  • Direct Payments: Based on a farm’s history of production, the government pays money to landowners to either plant or not plant specific crops. This method does not take market conditions into account.
  • Countercyclical Payments: Essentially a form of crop insurance, this method is tied to market prices and conditions but in an inverse relationship to crop yields. For example, if the price of corn falls because the harvest was especially good that year, corn growers would receive compensation to make up for the lower price as compared to the expected market price. Payments are often tied to a specific crop but there is flexibility to apply them towards other foods. This provision was expanded in last year’s Farm Bill to offset cuts in direct payments.
  • Marketing Loan Benefits: This is arguably a refined version of the countercyclical payments above. However, these benefits pertain to a specific crop. The inverse market relationship also applies to marketing loan benefits so the lower the crop’s final sale price, the more benefits a farmer would receive.
According to the Cato Institute, the Department of Agriculture spends between $10 and $30 billion in subsidies each year, depending on economic conditions. Compared to other nations, the subsidy rate for many crops in the United States is in line with the international average. Among OECD nations, Norway, Switzerland, and Iceland support the highest proportional commodity subsidies while Australia and New Zealand provide some of the lowest. 

Economists have argued that taxpayer-supported farm subsidies create market distortions and prop up an industry in need of competition and innovation. There are also concerns of inequity: taxpayers are providing benefits to a small group who are wealthier on average than the general population. Payments also put developed and developing countries at odds with each other. Rich countries, sometimes for national security and self-sufficiency concerns, subsidize crops when they could import more food at a cheaper price from poor countries. This would leave citizens in both sets of countries better off. Health experts have also argued that subsidies are ill-targeted and have caused increases in obesity and diabetes.

One proposal to reform a part of the current system is the Harvest Price Subsidy Reduction Act. Sponsored by Congressman John Duncan (R-TN) and Senator Jeff Flake (R-AZ), the bill would prohibit the government from subsidizing the premiums charged to farmers who subscribe to harvest price option (HPO) policies. Different from traditional crop subsidies and insurance plans designed to prevent farmers from losing money because food prices fall between planting and harvesting, HPO plans ensure that if agricultural prices are higher at harvest, farmers will receive benefits at the higher price level. It is a type of countercyclical payment but the baseline price is adjusted to reflect commodity prices that change on a daily basis.

Based on an estimate from CBO, H.R. 892 and S. 463 would decrease federal spending by almost $7 billion over the next five years. This is because farmers would be required to pay the full HPO premium amount, which are counted as offsetting receipts or decreases in direct spending.
The Bottom Line: The Harvest Price Subsidy Reduction Act would require farmers to pay the full premium for harvest price option plans. H.R. 892 and S. 463 would decrease spending by $7 billion between FY 2016 and 2020.

Most Friended

The Bill:
H.R. 699/S. 356, the Email Privacy Act

Cost Per Year: “No Cost” – Regulatory

Cosponsors: 244 Representatives

On Sunday, Hollywood’s elite filmmakers and actors gathered in Los Angeles for the 87th Academy Awards ceremony, which honored the best motion pictures and film producers of the last year. Two particularly notable attendees on the famed red carpet this year included journalist Glen Greenwald and Laura Poitras, who later in the evening accepted the award for “Best Documentary Feature” for their film Citizenfour. The documentary chronicled a series of interviews with former National Security Agency operative Edward Snowden.

Snowden, currently in hiding in Putin’s Russia to avoid felony charges of espionage in the United States, is at the center of an international controversy after he leaked information regarding government surveillance programs conducted in the wake of the 9/11 attacks. The secretive programs were the subject of Congressional debate for months after their revelation, and continue to prompt discussion over how much – if any – access the government should have to citizens’ information.

One of the issues raised during the height of the controversy was whether large corporations, especially phone and internet providers, were knowingly providing the government with data concerning their users’ communications. Google, Facebook, Yahoo, and Microsoft all acknowledged that the government requires them to periodically turn over some of that data, and under current law, the government is legally authorized to access certain types of email and online content that are currently protected by decades-old rules.

Congressman Kevin Yoder (R-KS) has introduced a bill that he originally proposed in the previous Congress. H.R. 699 would prohibit electronic communications providers from knowingly handing over the contents of those communications – including email, text messages, and other digital content – to government entities. The Email Privacy Act would also require the government to obtain a warrant from a court before it can require a communications provider to turn over any data related to its users.

“The last time Congress updated our email privacy laws, we were two years removed from the release of the first Macintosh computer,” Rep. Yoder said in a press release. “It’s time Congress modernized these outdated statutes to ensure that the rights protected by the Fourth Amendment extend to Americans’ email correspondence and digital storage.”

In the 113th Congress, the bill gained the support of over 200 Members in the House, but eventually stalled in committee. Rep. Yoder reintroduced the bill in early February, and it has garnered 244 cosponsors so far (including 89 Democrats and 155 Republicans). The Senate version of the bill, introduced by Senator Mike Lee (R-UT), has 12 cosponsors (including 13 Democrats and 7 Republicans).

The bill is not likely to require additional federal spending, as it is largely regulatory in nature.
 
The Bottom Line: The Email Privacy Act would require federal agencies to obtain a warrant from a court before accessing a digital communications provider’s records. It would also prohibit those providers from knowingly providing data regarding its users’ communications to a government entity.
 

National Taxpayers Union Foundation is a nonpartisan research and educational organization dedicated to helping Americans of all ages understand how taxes, government spending, and regulations affect them. Through our timely information, analysis, and commentary, we’re empowering citizens to engage in important policy debates and hold officials accountable.

Our findings are provided for educational purposes only and are not intended to aid or hinder the passage of legislation or as a comment on any Member’s or Candidate's fitness to serve. Photo Credits: Wiki Commons

 

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