Maximum Economic Growth for America through The Highway Trust Fund:
The MEGA TRUST ACT
(bill summary)

Next year the Congress must reauthorize highway and transit programs and the system of Federal financing for them. This is a very important issue for the nation. Highway and transit programs are crucial in every state. These are our methods for moving goods and people. They are key to our economy and our ability to connect to one another. This country needs good, safe highways in order to cross great distances and highway and transit construction and maintenance is an important part of every state's economy.

In order to facilitate our work in reauthorizing these programs, I plan to introduce a series of bills concerning important issues that Congress must address in that legislation. This will be the first of those bills, a proposal concerning revenues for the Highway Trust Fund. This bill will represent how this country will help pay for our highway and transit needs over the next several years.

The MEGA TRUST Act represents an important step in the effort to strengthen our Nation's economy, and improve its quality of life, by investing in transportation. It would increase revenues into the Highway Trust Fund by several billion dollars annually by making some needed corrections in the way Federal revenues are credited to the Highway Trust Fund.

Nothing in the bill increases any tax.

Federal dollars to help states and localities improve their highways and transit systems are derived largely from the Federal Highway Trust Fund. Under the system today, revenues from highway user taxes are deposited into The Highway Trust Fund - more specifically into separate accounts within the Fund for highways and for transit. These revenues are, in turn, distributed to States and localities for transportation investments that truly do improve our lives, create jobs, and make our economy work. This Trust Fund mechanism has been widely regarded as successful. But, as always, we must make adjustments to meet new challenges.

This bill would improve and extend this important financing mechanism, principally by making sure that certain revenues not currently credited to the Highway Trust Fund are placed in the Fund.

The MEGA TRUST Act does several things:

1. Section 2 would ensure that taxes paid on gasohol are fully credited to the Highway Account of the Highway Trust Fund. Today, when gasohol is taxed, the Mass Transit Account of the Highway Trust Fund receives its full share of revenues, as if the fuel were gasoline. But 2.5 cents of the tax per gallon that is imposed on gasohol is credited to the General Fund of the Treasury, not to the Highway Account. Thus, this section of the bill would ensure that those 2.5 cents per gallon go to the Highway Account.

2. Section 3 would ensure that the highway system does not bear the cost of our national policy to develop and promote the use of gasohol. Gasohol, as a fuel, is taxed 5.3 cents per gallon less than gasoline, even though there is no difference in the wear and tear imposed on the roads from gasohol fueled vehicles as opposed to gasoline fueled vehicles. This tax rate preference is part of our general national policy to advance the use of gasohol. So, it is clear that the General Fund of the Treasury should shoulder the cost of the gasohol tax preference, not the Highway Account of the Highway Trust Fund. Accordingly, this section of the bill would leave the gasohol tax rate preference in place but credit the Highway Account of the Highway Trust Fund with revenue equal to that forgone to the Treasury by the gasohol tax preference.

According to the US Treasury this 2.5 cent transfer would result in an increase in Highway Account revenues of approximately $700,000,000 per year. The transfer of funds equivalent to the 5.3 cents would increase Highway Account Revenues by about twice that amount annually. So the gasohol changes would properly credit the Highway Account with at least $2.1 billion annually. As the use of gasohol rises, so will the revenue to the Highway Account of the Highway Trust Fund.

3. Section 4 would credit the Highway Account of the Highway Trust Fund with interest on its balance.

4. Section 4 the bill would credit the Mass Transit Account of the Highway Trust Fund with interest on its balance.

Today, the Highway Trust Fund is one of the few Trust Funds in the Federal budget that is not credited with interest on its unspent balance. This is inappropriate. The MEGA TRUST Act would change this in order to make sure that collected highway user taxes are to be put to work for better transportation for our citizens. Estimates are that these two reforms regarding interest would increase the revenue to the Highway Account by over $550 million in the first year of reauthorization and would increase the revenue to the Mass Transit Account by over $200 million in the first year of reauthorization. How much interest would accrue to the accounts in later years will depend upon the balances that we leave in the accounts but, in any event, these reforms can provide important additional revenue for the highway and transit programs.

5. Section 5 would extend the basic highway user taxes and the Highway Trust Fund, so that they do not expire.

6. Section 6 would require an important study concerning the future financing of our Federal highway and transit programs. While the current mechanism has worked well, we know that cars may become more fuel efficient, or not use gasoline at all. Other changes are possible as well in our dynamic economy. While major changes will not occur overnight, we have to be ready for change. We have to understand what is likely to happen so we can consider making adjustments in the Highway Trust Fund and its revenue streams, so that we are not caught off guard and unable to adequately fund our transportation system. The bill would establish a commission to review these issues and report with recommendations.

In sum, through this MEGA TRUST Act we pursue ways to increase revenue into the Highway Trust Fund without raising taxes. We will need increased Highway Trust Fund resources to help us all structure a successful reauthorization bill. This bill responds to that need.