Nathan Hurst writes in Congressional Quarterly that U.S. Senator Barbara Boxer, chairwoman of the Senate Environment and Public Works Committee, favors shifting from the per-gallon tax on motor fuels to one that would be levied “upstream” at the wholesale level as a model for raising more revenue to shore up the Highway Trust Fund. “This was my idea: You get rid of the fee at the pump completely,” Boxer told participants at an American Highway Users Alliance summit in Washington last week. "but you replace it with a sales tax on fuels.”

The idea is based on Virginia’s recent overhaul of state transportation programs, where a bipartisan coalition agreed to scrap the 17.5-cents-per-gallon tax at the pump and replace it with a wholesale tax of 3.5 percent on gasoline and 6 percent on diesel. The state’s general sales tax was adjusted as well, with drivers in heavily populated areas regions of the state paying an extra 2.1 percent sales tax on gasoline to fund projects of regional interest.

Boxer told the highway users group that she's been meeting with Senator Max Baucus, who chairs Senate Finance, who is eager to include a fix for the highway fund in a broader package to overhaul the nation’s tax code. The Montana Democrat and his House counterpart, Ways and Means Chairman Dave Camp, R-Mich., are preparing tax overhaul proposals, although prospects for rewriting the tax code next year are considered dim.

Absent a broader tax bill, Baucus and Camp would still need to pass some kind of surface transportation revenue package to avoid shortfalls in the Highway Trust Fund. But Boxer said a bill that would force lawmakers to vote solely on an increase in transportation taxes would be a more difficult lift. The last time Congress raised motor fuels taxes was in 1993. The impact of inflation, a shift to more fuel-efficient vehicles and a decline in the number of miles that Americans drive have cut into the Highway Trust Fund’s buying power. The current federal transportation authorization, which expires next September, required $21 billion from the general fund to keep the trust fund solvent through next year.

Baucus has told authorizers he will be unable to cobble together a similar package of offsets to pay for a new bill. A wholesale tax could be set at levels that would raise more money and would adjust automatically for inflation. The cost would be built into the price that motorists pay.

Boxer and House Transportation and Infrastructure Chairman Bill Shuster, R-Pa., addressed the American Highway Users Alliance as it prepares a lobbying blitz in advance of a surface transportation reauthorization next year. Shuster urged industry lobbyists to make their case for infrastructure investments before talking about the sticky issues of funding. “We’ve got to build the case to the American people that there is a problem,” Shuster said. “Don’t lead with funding.”

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