Research & Commentary: The Grow America Proposal
The Obama Administration recently proposed a $302 billion transportation funding plan, the Generating Renewal, Opportunity, and Work with Accelerated Mobility, Efficiency, and Rebuilding of Infrastructure and Communities throughout America (GROW AMERICA) Act, to increase funding for highways, bridges, and transit and rail systems and pool their funding into one consolidated fund.
GROW AMERICA standardizes funding across multiple modes of transportation by converting the Highway Trust Fund (HTF) to the Transportation Trust Fund that would fund not only highways but also transit and intercity rail. Writing for the Heritage Foundation’s website, The Daily Signal, Emily Goff argues a mode-neutral highway law would have several negative consequences, including the reallocation of transportation funding away from traditional road projects motorists expect to be paid for with their gas-tax dollars.
The second major change would be the expansion of tolls on interstate highways. According to the U.S. Department of Transportation (DOT), GROW AMERICA would permit interstate highways that are currently toll-free to be tolled for purposes of reconstruction or mitigating congestion. In general, replacing gasoline taxes with tolls would be a step in the right direction. States should consider tolls because they are essentially use taxes that require only the motorists who use the road to pay for its maintenance. However, a major criticism of President Obama’s plan is that it does not contain a gas tax reduction.
As noted, GROW AMERICA would also expand the utility of toll revenues, allowing for improvements in public transit services operating in the same region as the toll facility. Such new tolling would require U.S. DOT approval, but these changes represent a vast expansion of government tolling powers, both in how they are collected and how they are used.
The main funding mechanism proposed in GROW AMERICA is a $150 billion one-time business tax, which the Tax Foundation argues is misleadingly labeled a corporate tax cut. Although the exact nature of the so-called corporate tax reform is unknown, some tax experts believe it may be another round of global corporate tax repatriation in which U.S. companies are allowed to return overseas dollars to the United States at reduced tax rates.
Joseph Henchman of the Tax Foundation notes a one-time tax hike is a poor funding source for annual expenditures: “To paraphrase Milton Friedman, a tax cut that raises revenue isn’t a tax cut. The GROW AMERICA Act is actually unspecific about what type of corporate tax reform is required, so long as it raises $150 billion in one-time revenue. But even if all that happens, the $150 billion business tax is still one-time revenue, and transportation spending is annual, large, and growing.”
As transportation infrastructure in the United States has aged, all levels of government have struggled to maintain vital roads, bridges, and railways that keep the economy moving. Although the use of tolling to fund new transportation projects represents an improvement, the GROW AMERICA Act is a top-down, bureaucratic approach to transportation financing that does not solve funding problems. Instead of allowing states to determine which transportation projects to emphasize, the federal government takes over. The proposal is expensive and funded by a one-time tax scheme that does little to improve the nation’s economic competitiveness.
The following articles examine transportation policies from varied perspectives.
Obama Administration Unveils Transportation Spending Plan
Daniel Vock of Governing magazine examines the plans sent by U.S. Transportation Secretary Anthony Foxx to Congress detailing how the agency would like to spend $302 billion over the next four years on transportation projects. “The plan includes new money for the chronically underfunded Highway Trust Fund. The proposal would include $63 billion over the next four years to make sure the fund does not run out of money while paying for the current level of services. On top of that, there would be another $87 billion for repairs and construction beyond what the federal government pays for now,” Vock writes.
Research & Commentary: State Motor Fuel Taxes
In this Heartland Institute Research & Commentary, Matthew Glans and Taylor Smith examine research on motor fuel taxes, their application, and their economic effects.
Federal Surface Transportation Reauthorization: The Road Ahead
Paul J. Epstein, Cynthia Urda Kassis, and Patricia G. Hammes of Shearman & Sterling LLP summarize the key elements of GROW AMERICA, congressional activity to date on a new bill, and specific surface transportation financing options likely to be discussed among stakeholders.
Research & Commentary: Congestion Traffic Pricing
Matthew Glans of The Heartland Institute examines research on congestion pricing and several proposals on how to implement a pricing system to alleviate traffic congestion.
Ten Principles of Privatization
Privatization means shifting some or all aspects of service delivery from government to private-sector providers. It is a strategy to lower the costs of government and achieve higher performance and better outcomes for tax dollars spent. If poorly executed, privatization can fail like any other policy. Fortunately, we have the experiences of governments in the United States and around the world to learn from. These 10 principles of privatization from The Heartland Institute capture the best practices that have emerged from those experiences.
Four Ways the GROW AMERICA Transportation Plan Won’t Help You
Emily Goff of the Heritage Foundation outlines four reasons the U.S. DOT’s GROW AMERICA proposal would fail to solve the transportation challenges on the ground in local communities.
GROW AMERICA: An Overview
This Fact Sheet from the U.S. Department of Transportation outlines the GROW AMERICA Act, the problems it is designed to address, and how it is intended to work.
Transportation Plan Proposes Business Tax but Secretary Floats Possibility of Tolls
Joseph Henchman of the Tax Foundation examines the GROW AMERICA Act and finds it boosts spending enough to satisfy current transportation interests but leaves future funding unaddressed. “However, the bill’s elimination of the ban on tolling interstate highways could provide a path toward smarter transportation funding,” Henchman notes.
Fuel Taxes, Tolls Pay for Only One-Third of Road Spending
Examining how states acquire transportation funds, Joseph Henchman of the nonpartisan Tax Foundation finds highway user taxes and fees cover just 32 percent of state and local spending on roads, with the rest of the financing coming from general revenues, including federal aid.
Raising Gas Taxes Won’t Fix Our Bridges
In the aftermath of the I-35 bridge collapse in Minneapolis, Adrian Moore of the Reason Foundation argued increasing fuel taxes should not be the only response to state transportation funding problems: “First we must examine how we spend transportation dollars now. Then we maximize the value out of those dollars. Finally, the last step is to address the need for additional revenue,” Moore wrote.
Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit the Budget and Tax News Web site at http://news.heartland.org/fiscal, The Heartland Institute’s Web site at www.heartland.org, and PolicyBot, Heartland’s free online research database, at www.policybot.org.
If you have any questions about this issue or The Heartland Institute, contact Heartland Institute Legislative Specialist Matthew Glans at 312/377-4000 or firstname.lastname@example.org.