Wednesday, March 10, 2004

Railroads Throw Switch On Deficit Tax

WASHINGTON - Two of Congress' most important items of business are the energy and surface transportation bills. At least one industry has a dog in both fights: the railroads.

Near the top of Big Rail's wish list for both pieces of legislation is ridding itself of what's known as the "deficit-reduction fuel tax." Huh? That might sound a bit ambitious, given that Uncle Sam's spending this year is expected to exceed revenue by some $477 billion. But industry lobbyists argue, with some justification, that it's an unfair tax. Provisions to eliminate it are in both bills.

Repeal "has very strong support from both the House Ways & Means and Senate Finance committees," says Jennifer Macdonald, director of government affairs for the Association of American Railroads (AAR).

The deficit-reduction fuel tax, 4.3 cents per gallon, was enacted in 1990 when the federal government's accounts were $124 billion in the red. Railroads and trucking companies paid the tax initially, followed by inland barges in 1993 and commercial airlines in 1995.

Two years later, however, airlines and truckers managed to get their portion of the levy diverted into airport infrastructure and federal highway trust funds, respectively. In other words, the taxes they pay are used to benefit them. But barges and railroads, which have no such trust funds, continued to pay the deficit tax, even as the federal budget moved into the black in 1999.

Full story at Forbes.com