Senate Finance Committee Passes Highway Funding Package by 17-4 Vote
Grassley-Baucus Bill Set to Move Quickly to Senate Floor
(WASHINGTON, D.C.) The U.S. Senate Finance Committee today passed the revenue portionof the Safe, Accountable, Flexible, and Efficient Transportation Equity Act of 2004 (SAFETEA),the highway and transit bill that reauthorizes the 1998 Transportation Equity Act (TEA-21).U.S. Senator Max Baucus, ranking member of the committee, and Finance ChairmanChuck Grassley have worked together on the highway and transit legislation and reachedagreement on an effective bill that will add $35 billion to the Highway Trust Fund over the nextsix years to help states pay for highway and transit projects.
“This bill is more than just a highway bill - it's a jobs bill," Baucus said. "Highway andtransit spending creates thousands of jobs and provides valuable new opportunities incommunities where manufacturing jobs are disappearing. TEA-21 accounted for 11,000 goodpaying jobs in my home state of Montana and I know SAFETEA will have the same positiveeffect. I commend the efforts of Chairman Grassley and my colleagues on the FinanceCommittee in pushing this legislation through the committee.”
The current transportation funding bill, TEA-21, expired on September 30, 2003 and wasextended until February 29, 2004. If SAFETEA is not passed before that date, states will nolonger be able to obligate federal funds for transportation projects and the U.S. Department ofTransportation will not have authority to pay certain employee salaries.With jurisdiction over the Highway Trust Fund, the Finance Committee is responsible forauthorizing the taxes that make up the balance of the Trust Fund and determining how thesefunds may be spent.
Funding provisions in the Finance Committee SAFETEA legislation, in addition togasoline tax receipts, include:
· Volumetric Ethanol Excise Tax Credit: Under current law, the excise tax on gasoline is18.4 cents per gallon and 13.1 cents per gallon on ethanol-blends, with a majority of thefunds first being deposited to the General Fund and then transferred to the Highway TrustFund. Under the Finance Committee bill, the ethanol excise tax going to the HighwayTrust Fund would increase to 18.4 cents per gallon. A credit would then come from theGeneral Fund rather than the Highway Trust Fund to reimburse the difference between13.1 cents and 18.4 cents per gallon.
· Fuel Fraud Prevention: Under the Committee-passed bill, new registration andreporting requirements are included on all taxable fuels to help crack down on fuel fraud.For example, fuel excise taxpayers would be required to file monthly statementsidentifying all fuel removed from a terminal. Additional provisions are included toeliminate fraud on aviation and dyed fuels.
· Excise Tax Reform: SAFETEA would raise additional funding through the reform of anumber of excise taxes, including highway excise taxes, aquatic excise taxes, aerialexcise taxes, alcoholic beverage taxes, and sport excise taxes.
“We've put together a strong package that will provide approximately $35 billion infunding, plus additional funding from gas tax receipts," Baucus said. "Now that the bill haspassed the Finance Committee, it's vital that we move smoothly and expediently on the Senatefloor to pass the bill before the Feb. 29 expiration date. We've worked together to produce a goodbill that will help create jobs and strengthen our infrastructure. ”
In addition to passing the highway and transit funding package, the Committee today alsotook up a pension-related provision involving Corporate Owned Life Insurance (COLI). Lastyear, the Finance Committee passed the "National Employee Savings and Trust EquityGuarantee Act," but left the option open to come back and reexamine the COLI provisions in thebill.
Today, the Committee reached agreed to make COLI payments subject to tax unlesscertain qualifications are met, such as the employee worked for the company in the yearpreceding their death or the employee was a highly compensated employee. The agreement alsoensures that employees must be notified, and voluntarily consent to the purchase, before acompany purchases a COLI policy on their behalf. With passage of the COLI provisions today,the "National Employee Savings and Trust Equity Guarantee Act" is now headed for the Senatefloor.
The Committee today also passed the "Tax Administration Good Government" bill. Thegoal of the Good Government bill is to provide taxpayers with additional safeguards, improvetax administration, simplify tax laws and modernize the U.S. Tax Court. The legislation wascrafted after consultation with groups such as the Internal Revenue Service, the NationalTaxpayer Advocate, taxpayer groups, and the Joint Committee on Taxation.
Sen. Baucus Committee Statement Attached:
Statement of U.S. Senator Max Baucus
Finance Committee Markup of Corporate-Owned Life Insurance (COLI), Safe,Accountable, Flexible, and Efficient Transportation Equity Act (SAFETEA), andTax Administration Good Government Act
“We have before us today an important trio of bills, covering corporate-owned life insurance,highway financing, and tax administration. Our agenda today reflects the variety of issues thatmakes the Finance Committee the interesting place it is.
The first piece of business before the Committee involves Corporate Owned Life Insurance — orCOLI. Based on a unanimous consent agreement that we reached last October, the Committeewill reopen the pension bill — solely to address COLI and related provisions. The Committeehas wrestled with this issue for months. A great deal of discussion, analysis, and hard work hasgone into finding an appropriate solution.
Members on both sides of the aisle have worked together. And the legislation that is before ustoday represents an agreement among Members of the Committee. The legislation before usmakes COLI payments subject to taxation, unless a few key exceptions are met.
· If the individual covered by the insurance policy worked for the company duringthe year preceding the individual’s death, then the insurance policy’s paymentsare not subject to tax.
· If the company uses the insurance policy’s payments to purchase the companyshares of the deceased individual, then they are not subject to tax.
· If the death benefits go the employee’s family or estate, then they are not taxed.
· And if the employee was a director or a highly-compensated individual, then thepayments are not subject to tax.
But more importantly, the legislation ensures that if a company plans to purchase a policy on anemployee’s life, then the company has to notify the employee. And the employee has theopportunity to say “No, I don’t want you to buy that policy.” If the employee doesn’t consent,then the proceeds will not be tax- free.
This bill also includes a requirement that a company report annually the number of employeesinsured under these policies, and the total face amount of those policies. At the hearing inOctober, we heard that information was not available on the amount of COLI that is in force.This bill addresses that information deficit. I believe that this bill is the right answer to thequestions that we have faced on COLI. And I want to thank all my Colleagues who have put somuch time and effort into getting us to where we are today.
Now, I know that there are some differences of opinion among the Members of this Committee.Nonetheless, Members have shown a great deal of cooperation to get to this point. I especiallywant to thank Chairman Grassley, Senator Bingaman, and Senator Conrad. I am pleased that wewill get this section of the pension bill worked out today so that we can move on and report thebill. The pension bill will provide some very important participant protections. We need to getit moving.
The second item on our agenda today is the revenue title of the highway bill. But this is morethan just a highway bill. It’s a jobs bill.
The Finance Committee has the honor of having jurisdiction over the Highway Trust Fund. Ourresponsibilities are threefold: First, we authorize the taxes that makeup the balance of the TrustFund. Second, we extend taxes payable to the Trust Fund. And third, we determine how moneycan be spent from the Trust Fund.
But it is not just the jurisdiction of this Committee to fund the highway reauthorization, it’s alsoour responsibility. With a stagnant economy and high unemployment rates, one would be hardpressed to find another single piece of legislation that will help as much as the highway bill. Forevery billion dollars spent on highways, 48,500 jobs are created. That is what this bill is about.And, to me, that is why it is so important. I have worked on transportation issues for a long time.As the senior Democrat on the Senate Environment and Public Works Committee, I played acentral role on both ISTEA and TEA-21.
TEA-21 accounted for 11,000 good-paying jobs in my state of Montana. And highway dollarshave a ripple effect in the economy - creating jobs for everyone from highway constructioncrews, to sand and gravel distributors, to contractors, and down the line. And these jobs providevaluable new opportunities when manufacturing jobs are disappearing.
In my state of Montana, the highway program is a jobs program. I know this is true for manymembers of this Committee - Iowa, Wyoming, Utah, and Arkansas, North and South Dakota,and others. Rural states rely on the highway program to create and sustain jobs in their states.But all states need highway money for their economy and their way of life.TEA-21 passed overwhelmingly in 1998 because it provided, on average, a 40 percent increasein funding. In addition to the 4.3-cent gas tax that was transferred to the Trust Fund from thegeneral fund, that 40 percent increase was primarily derived by the new budgetary treatment forhighways and the “protected” status of the Highway Trust Fund. It is crucial to this program tomaintain those budgetary firewalls.
So TEA-21 reauthorization really comes down to this: In order to pass a bill, we will need moremoney. That’s where the Committee comes in. In addition to the expected gas tax receipts, wehave looked for additional revenue.
We will be making the changes to ethanol taxation that I proposed over three years ago. ThisCommittee has passed these changes twice already, in what we call the Volumetric EthanolExcise Tax Credit (VEETC) bill. These changes have passed the Senate. Both Leader Frist andSpeaker Hastert have assured me that those changes will be enacted this time.
Those changes remove the burden of the ethanol subsidy from the Highway Trust Fund. Thesubsidy is a good idea. It is good agriculture policy and good energy policy. But as a matter ofhighway policy, the roads receive the same wear and tear from vehicles regardless of the fuelthey use. So it should not be the Highway Trust Fund that loses revenue.By the same token, there are several subsidies from the federal gas tax that certain groups receivethat are not connected to highway policy. These subsidies are received as refunds from thegeneral fund.
The problem is that the general fund gets reimbursed by the Highway Trust Fund. Why?With all the talk about the general fund transferring money to the Trust Fund, the real truth isthat the Trust Fund actually transfers money to the general fund. It is time to set the accountsstraight.
I don’t oppose these subsidies. But I don’t believe that our highway dollars should pay for them.The mark today contains proposals that will remove the burden of these exemptions from theHighway Trust Fund.
Also in this bill, we are dealing with the issue of fuel tax evasion and how to prevent it. SenatorGrassley and I introduced a bill that would close a lot of loopholes in the tax code and catchsome of the bad guys, the ones who are dishonest and defrauding the federal government.We are also proposing the continuation of current law regarding the Mass Transit Account of theHighway Trust Fund. That means that the Mass Transit Account will continue to receive 2.86cents from every gallon of fuel taxed - even the new gallons that we recouping. This markfunds transit at a level directly related to the receipts it receives under current law.
And today we are also marking up excise tax reform legislation. This Committee has consideredthese provisions on several occasions. This package repeals the Civil War-era occupational taxon establishments that sell alcoholic beverages. And it makes several improvements to theexcise taxes paid on sporting equipment. I am pleased that the Chairman has included theseitems in his mark.
The third bill that we will address today is the Tax Administration Good Government bill. Mr.Chairman, more than 5 years ago, Congress passed legislation to reform the Internal RevenueService. To date, significant progress has been made to implement that legislation and toimprove the quality of service to taxpayers. But much work remains to be done.
This afternoon, the Committee will consider a package of good government proposals to furtherimprove the operations of the IRS and strengthen taxpayer protections. The Chairman’s Markwill afford taxpayers additional safeguards in their dealings with the IRS, improve taxadministration, reform the interest and penalty regimes, modernize the U.S. Tax Court, andsimplify our tax laws.
Congress’s responsibility for the tax system, however, does not stop after we pass tax laws. Wehave a responsibility for oversight to ensure that taxpayer rights are protected and that our lawsare administered according to congressional intent.
The mark builds on S. 882, the Tax Administration and Good Government Act, which ChairmanGrassley and I introduced last April. Since that time, we have worked closely with taxpayergroups, practitioners, the Administration, the Internal Revenue Service, the National TaxpayerAdvocate, and the Joint Committee on Taxation to develop additional provisions. We have alsoconsulted closely with members of this Committee to incorporate their ideas. The Chairman’sMark reflects these efforts.
This is a good, balanced, and important package of good government reforms that won’t attract alot of headlines, but will help a large number of taxpayers. I want to thank the Chairman forincluding this package as part of today’s markup. And so, Mr. Chairman, I support these threebills before the Committee today, and urge that we report them favorably.”
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