The House overwhelmingly passed an unpopular proposal to use revenues from underfunded pensions to pay for one year of funding for the Highway Trust Fund. According to NBC News, the House bill will pay for a 10-month funding extension for road and infrastructure projects "using pension tax changes, customs fees and a transfer from the Leaking Underground Storage Tank Trust Fund." Despite threats from conservative groups Club for Growth and Heritage Action, only 45 Republicans voted against the bill.
House Highway Bill VOTE BREAKDOWN: GOP: Yea-181 // Nay: 45 DEM: Yea-186 // Nay: 10 TOTAL: Yea-367 // Nay: 55— Frank Thorp V (@frankthorpNBC) July 15, 2014
Both Democrats and Republicans have criticized the bill for being a short fix, but Senate Majority Leader Harry Reid said the Senate would likely pass the bill before the August recess. The Department of Transportation has said the fund will run dry by the end of August, and plans to limit payments starting next month.
As we've explained in the past, the Highway Trust Fund is currently funded by fuel taxes that haven't risen since 1993. That, along with the rise of vehicle fuel efficiency, is why the fund has been underfunded for years. Instead of raising the fuel tax or finding a long-term solution to the funding problem, Congress has come up with short-term fixes like the one voted on by the House today. It's a terrible idea. As Josh Barro at The Upshot explained:
If you change corporate pension funding rules to let companies set aside less money today to pay for future benefits, they will report higher taxable profits. And if they have higher taxable profits, they will pay more in taxes over the 10-year budget window that Congress uses to write laws. Those added taxes can be diverted to the Federal Highway Trust Fund.
First, this is still only a one year solution. Something like, say, the bi-partisan Senate plan to raise the gas tax 12 cents and tie it to inflation, would have made much more sense and been a permanent solution. This plan is also taking tax money from the future and spending it today. Years from now businesses will have to pay more towards pensions, to make up for today's underfunding, and that will result in lower taxes. But that's after 2024, when this year's 10-year budget window closes. "'Fiscal responsibility,' as popularly defined in Washington, ignores anything that happens after 2024," Barro wrote.