Grassley's Panel Avoids Gas-Tax Hike (Photo by the Office of Sen. Charles Grassley)

The Senate Finance Committee has approved $35 billion in revenue raisers to help fund a $318-billion, six-year successor to the Transportation Equity Act for the 21st Century. Although the tax-writing committee cleared the package on Feb. 2 by a comfortable margin of 17-4, the Bush administration raised warning signals.

Supporters of the transportation measure won a procedural victory Feb 2, turning aside opponents' procedural attempt to delay the bill. The vote to cut off debate passed 75-11.

In its revenue package, the Finance Committee avoided any increase or indexing of federal motor fuels taxes. They did include such things as cracking down on fuel tax fraud, using interest on the Highway Trust Fund balance, spending down some of that balance and shifting the rest of the tax on gasohol to the trust fund from the general fund. Chairman Charles Grassley (R-Iowa) said, "Our challenge was to get the most bang for the buck without asking taxpayers to pull more money from their wallets. We accomplished that goal."

Mineta says use of general fund would draw veto threat. (Photo by U.S. Dept. of Transportation)

But some committee members took aim at two of the revenue raisers, arguing that they would use general fund money, not Highway Trust Fund money, to pay for transportation projects. Those provisions, which would raise $17 billion over six years, include a plan to eliminate the impact on the trust fund of the tax differential between gasoline and gasohol and a plan to end trust fund payments to the general fund for state and local government exemptions from the fuel tax.

Those provisions survived in the committee. But Transportation Secretary Norman Mineta and Treasury Secretary John Snow said later that day that the new bill should have all its highway spending from the Highway Trust Fund. In a letter to Senate Majority Leader Bill Frist (R-Tenn.), Mineta and Snow said the bill must not have any tax increases, bonding mechanisms (except private-activity bonds) or general fund highway financing. If the transportation bill that violates any of those three points, is sent to the President, "his senior advisors would recommend that he veto the bill," Mineta and Snow wrote.