Now is time to raise fuel “user fee,” U.S. Chamber’s Donohue urges Congress

Congress should put aside its philosophical differences and make a long-deferred investment in transportation infrastructure through a “dime or two” per-gallon increase in the federal fuel tax, which should be made more politically palatable by more accurately referring to it as a “user fee” rather than a tax.

That’s the word from Thomas J. Donohue, president and CEO of the U.S. Chamber of Commerce in his annual “State of American Business” address to business leaders on Jan. 14.

“The state of American business is improving,” Donohue said. “America voted for a new direction—one that puts jobs and growth first and demands competence and leadership from government.”

Predicting the U.S. economy will continue to grow at a rate of between 3 and 3.5 percent of Gross Domestic Product through at least the middle of this year, Donohue said now is no time for the nation to rest on its economic laurels.

“This is no time to be complacent,” Donohue said. “We’ve had a few good quarters of economic growth. But we’re not out of the woods. That’s why our elected leaders, divided as they may be, must work together to put jobs, growth, and opportunity first.”

Donohue urged Republicans and Democrats to “acknowledge their differences and just make a deal” to help growth in areas of trade, energy, technology and infrastructure. He also called for a government reform agenda that eases uncertainty and supports growth by improving our immigration system, the regulatory process, the tax code, entitlement programs, the legal system, and public schools.

“Infrastructure is another big growth opportunity,” Donohue said, indicating the Chamber would again push for a long-term highway reauthorization bill. That funding mechanism is due to expire at the end of May.

Interestingly, Donohue did not call the federal levy on fuel a “tax.” Rather, he called it a “user fee,” which may make it more appealing to conservatives who are adamantly opposed to any tax increase.

“The simplest and fairest way is through a modest increase in the federal fuel user fee that hasn’t been raised in 20 years,” Donohue said. “I know the politics are difficult, but isn’t this the time to try?”

Noting the average price of gasoline has dropped $1.45 a gallon in the past year, Donohue asked: “Isn’t it reasonable to invest a dime or two in roads and bridges and mass transit?” He said the Chamber plans to continue to make that strong case to Congress, the White House and directly to the American people.

Meanwhile, sentiment for raising the fuel tax, or at least adjusting it for inflation since it was last changed in 1993, is decidedly mixed on Capitol Hill. In particular, Republicans once adamantly opposed anything resembling a tax increase suddenly have changed course with some saying that “everything is on the table” when it comes to infrastructure.

Sen. Jim Inhofe, R-Okla., new chairman of the Senate Committee on Environment and Public Works committee, said raising the fuel tax is “clearly one of the options” being discussed behind closed doors.

Senate Finance Chairman Orrin Hatch, R-Utah, and Sen. John Thune, R-S.D., the third-ranking Senate Republican and incoming Transportation and Commerce Committee chairman, also said they were open to the possibility of raising the tax.

That is a huge change. Previously, the only Republican senator who publicly backed a hike in the fuel tax was Sen. Bob Corker, R-Tenn. He and Sen Richard Blumenthal, D-Conn., co-sponsored a bill in the last Congress that would effectively have raised the fuel tax a nickel a year for the next three years. It went nowhere.

But opposition from the Republican-led House of Representatives remains—and it is strong. Even President Barack Obama said late last year that now was not the time to raise fuel taxes—but that was before the precipitous drop in the costs of gasoline and diesel, which would largely make a fuel tax hike invisible to most Americans.

House Speaker John Boehner, R-Ohio, remains unconvinced raising fuel taxes is the way to go –even with the prospect of an $18 billion shortfall in the Highway Trust Fund looming this year. And Rep. Bill Shuster, R-Pa., chairman of the House Transportation and Infrastructure Committee, recently said that raising the fuel tax is “off the table.”

Boehner recently bragged that he has “never voted to raise the gax tax,” before adding: “A highway bill is critically important. It’s a priority for this year. How we’ll fund it… We are going to have to work our way through this.”

Democratic leaders, meanwhile, have said that “now is the time” for an increase in the fuel tax – 18.4 cents a gallon on gasoline, 24.4 cents on diesel, unchanged since 1993 – but Washington insiders say it remains an uphill fight.

“The president doesn’t want it, and Shuster and Boehner don’t want it,” Randy Mullett, vice president of government relations for Con-way Inc., told LM. “But they are between a rock and a hard place if they want to keep the Highway Trust Fund viable.”

Some Republicans are talking about dissolving the Highway Trust Fund altogether and just giving “block grants” to states to do with what they wish. Most trucking officials are against that model. As Mullett said, “That leads to devolution and adds a whole lot of uncertainty to our mode and our business model.”

The uncertainty over the future of the Highway Trust Fund leads to other questions. Is the tax collected in a way easily visible to shippers and easily transferred into truckers’ rate systems? What do they tax and how they tax it. House Speaker Boehner is talking about taxing crude oil at the barrel. That would effectively raise taxes not just on truckers but on the railroads and barge companies.

“That becomes a huge food fight (among the modes),” Mullett said. “It has both opportunity and traps in it.”

Sen. Inhofe recently said lawmakers “don’t have a choice” but to consider raising the gas tax, which he says is more accurately called a “user fee.” That might give politicians an out to avoid being characterized as a tax raiser by the conservative founder of Americans for Tax Reform, Grover Norquist, who effectively targets any politician who votes for a tax increase.

“Before Congress even thinks about asking Americans to pay higher prices at the pump, it should make sure that the $33 billion the federal government collects annually from drivers is spent efficiently,” Americans for Tax Reform said in a statement.

Thune, R-S.D., isn’t for a fuel tax increase but recently told “Fox News Sunday”: “We have to look at all options.” But he said a fuel tax increase probably would pass only if done in the context of broader tax reform, which is unlikely this year. That is a sentiment echoed by Sen. Hatch, R-Utah.

“People who use the highways ought to pay for them,” Hatch said recently. “That’s a small price to pay to have the best highway system in the world. And that may be where we’re going to have to go.”

Mullett, a veteran of Washington politics, said when he hears politicians say “everything is on the table,” what they really mean is, “They cannot make up their minds.”

“Everything may be on the table but only two of them are doable,” Mullett said. “Either they raise the fuel tax or they kick the can down the road with another short-term funding extension.”