Short Term Extension Likely for Highway Trust Fund
Thursday, May 21, 2015
The $11 billion patch that Congress gave the Highway Trust Fund last July will expire on May
31, making an extension of the authorization and funding for current highway programs was a
must-do item before the Memorial Day recess to prevent a shutdown of existing transportation
projects. With the clock ticking, the one solution that no one wanted—a short-term patch—
became the only option because it does not involve new revenues to fund increased
expenses. The House passed an extension of the existing authority and current level of funding
until July 31, and the Senate is expected to do the same before it heads out of town on recess.
The extension came after weeks of negotiation to find $11 billion to fund the Highway Trust
Fund until the end of the calendar year. This means Congress will face crunch time again before
the August recess.
There are several long term solutions being floated, but it remains to be seen if Congress can
agree on an approach before August, or at least sometime later this year. One approach is an
increase in the gas tax coupled with reductions in income tax or increased tax credits. Hikes in
the gas tax are radioactive in both chambers, and the cost and nature of income tax cuts would
Another controversial proposal is funding infrastructure spending by allowing corporations to
repatriate their foreign profits through investment in infrastructure bonds that entitle them to
bring foreign assets back tax free. A variation of this proposal is to repatriate foreign profits and
use them to fund both infrastructure projects and a reduction in taxes to businesses.
In his State of the Union address, the President recommend a new class of tax free “municipal”
bonds called Qualified Public Infrastructure Bonds (QPIB) that would extend the benefit of
municipal bonds to P3s. S. 1186, recently introduced in the Senate, would permit $180 billion in
tax exempt Move America Bonds, which essentially are private activity bonds with less
restrictions. The bonds could be used to finance projects that are not government-owned if they
are open to the general public. Interest earned on the bonds would be exempt from the
alternative minimum tax, making them attractive to investors. The cost of this proposal in terms
of lost tax revenues over the next decade will be problematic.
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