section III of the report, entitled "Benefits to Others Than Highway Users" begins with the following important statement: There exists a formidable array of direct and indirect benefits resulting from Federal-aid highway improvement, in addition to benefits resulting from the actual use of such highways. Recent studies of the economic impact of highway improvements shed considerable light on the identity of the nonvehicular beneficiary groups and on the magnitude and nature of the benefits accruing to these groups. It is further stated in the report, page 63: It is plain that the nonvehicular benefits revealed and measured in the economic impact studies are of great importance to the American economy. They form a large part of the justification for the Federal-aid highway improvement program upon which the Nation has embarked. The foregoing statements indicate the extent and importance of the nonuser benefits of the Federal highway program and although preliminary to the final report to be submitted to the Congress in January 1961, they argue strongly against increased taxes on the highway users at this time. In addition there is the question of the enormous benefits of the highway program from the standpoint of national defense. The Congress recognized the national defense aspects of the highway program when in the Federal-Aid Highway Act of 1956 it redesignated the National System of Interstate Highways as the National System of Interstate and Defense Highways. There is no recognition of this in the current financing of the highway program. However, it is also mentioned in the third progress report of the Secretary of Commerce as an important factor and undoubtedly will be given more complete treatment in the final report. An additional factor in the highway tax picture which cannot be overlooked is the magnitude of the special taxes being paid by highway users which are going into the general fund of the Government and not to the highway fund. It is estimated that during the financing period of the highway program the Nation's motor-vehicle owners and operators will pay more than $20 billion in special taxes going to the Government's general fund. This will be due to the fact that the tax on lubricating oil, the tax on motor-vehicle parts and accessories, the tax on new passenger automobiles, and one-half of the tax on new trucks, buses, and trailers are considered general fund taxes rather than highway user taxes. However, with the exception of the tax on lubricating oil, these taxes have no counterpart in levies on other forms of transportation for the general support of the Government. It is the opinion of the trucking industry that the highway program can be kept on schedule by reverting to the original plan carefullly worked out by the action of this committee in the 84th Congress as outlined in House Report No. 1899. As set forth on page 17 of House Report No. 1899, the plan envisioned a self-liquidating program with income from earmarked taxes in the trust fund being equal to anticipated expenditures over the life of the program. It was not expected that income for the trust fund would match expenditures in each year. The middle years of the program were to show an excess of expenditures over revenue with the reverse with the reverse being true in early years of the program and in the last 3 years. The balancing of income with outgo was to be accomplished through a system of repayable advances from the Government's general fund. These loans were to be charged against the trust fund at the then current applicable interest rate of 214 percent. The balancing of income with outgo over the life of the program, including interest charges for the repayable advances, was to be accomplished with no revenue accruing to the trust fund other than special highway user taxes, and despite the fact that the trust fund was charged with $1,958 million for highway authorizations contained in the 1954 and prior acts. The trucking industry believes that this general method of financing, coupled with the recommendaitons for a study of the overall equity of the tax program, provided a sound basis for getting the highway program underway. However, this plan was nullified by the insertion of section 209 (g) in the Highway Revenue Act of 1956 as finally adopted. Section 209 (g), known as the Byrd amendment, requires the Secretary of Commerce to limit apportionment of interstate funds to the States to available revenue in the trust fund. It changed the original financing plan to a pay-as-you-go basis on a year-to-year schedule by preventing the use of repayable advances or loans from the general fund. Thus, the impending crisis in the financing of the highway program became inevitable. However, the crisis in financing was postponed by action of the 85th Congress in enacting the FederalAid Highway Act of 1958 which suspended application of section 209 (g) for a period of 2 years. At the same time the groundwork was laid for an even larger deficit in the trust fund by the authorization of an additional $800 million in interstate funds and $400 million in emergency supplemental primary and secondary-road funds.. This $400 million was described as an antirecession measure and required to be under contract by December 1, 1958. Although a special authorization classified as an emergency measure in view of the general economic outlook, it was charged against the trust fund with no offsetting transfer from the general fund. A return to the principal of the original highway financing plan requires further suspension of section 209 (g) or its outright repeal. The highway trust fund must be in a position to augment its revenues through use of repayable advances or loans from the general fund as originally conceived. If this is deemed inadvisable by the Congress because of its effect on the Federal budget, then consideration should be given to the issuance of revenue bonds secured by future trust fund receipts. The issuance of revenue bonds although on a much smaller scale would be in line with the financing of an expanded highway program as outlined by the President's Advisory Committee on a National Highway Program in 1955. Senate Joint Resolution 109 provides revenue bond financing for. the highway program but does so with the control over the bond issue in the hands of the Treasury Department, thus avoiding uncontrolled competition of highway bonds with other Government bonds, such as would be the case if the highway bonds were handled through a separate Government corporation. That was introduced by Senator Case. We think the highway trust fund will be in sound fiscal position and fully capable of discharging its liabilities either under a program of repayable advances or revenue bonds secured by trust fund receipts. This will be true even if highway costs increase materially as has been estimated. First of all, the anticipated revenues coming from special highway user taxes have, in our opinion, been estimated on the conservative side. This is indicated by the fact that actual receipts from the earmarked taxes in fiscal 1958, a recession year, totaled $2,116 million or 6.5 percent more than the original estimate shown in table 3 of House Document No. 1899. There is every reason to conclude that the $38.5 billion originally estimated as trust fund receipts over the life of the program is considerably under the amount that will ultimately be realized from special highway user taxes alone. In addition, it is difficult to believe that the Congress, when it has before it the final report called for by section 210 of the Highway Revenue Act of 1956, will not deem it both necessary and justifiable to augment the highway trust fund with revenues other than highway user taxes. In summary, we feel the highway program can be kept on schedule without further increases in highway user taxes at this time. This can be accomplished by a return to the original concept of balancing income and outgo in the highway trust fund through the use of repayable advances, loans, or issuance of revenue bonds secured by trust fund receipts. Any of these methods need only be a short-term consideration, or at least until Congress has before it the final report of the Secretary of Commerce under section 210 of the Highway Revenue Act of 1956, together with a revised estimate of the needs of the Interstate System. Mr. IKARD (presiding). Does that conclude your statement? Mr. IKARD. Are there any questions? Mr. BYRNES. I have just one question. What is your position with respect to the extent of allocations that should be made for highway construction during this interim period? Mr. KILEY. Well, as we understand it, there are two problems. One is the initial problem of about a half-billion dollars which they need in the appropriation bill in order that the Bureau of Public Roads can honor the outstanding contracts. The next problem is that they cannot apportion for the 1961-62 period. However, the reason they cannot apportion it is because of the Byrd amendment. Mr. Tallamy stated in his testimony, and he also stated before the Commerce Department hearings on the Commerce Department appropriations bill, that he had authorizations for that year of $212 billion, but he could not apportion because of the Byrd amendment. So suspension of the Byrd amendment would eliminate that problem. Mr. BYRNES. You would recommend, then, an apportionment of at least the $2.3 billion that is presently provided in the authorization? Mr. KILEY. It is $212 billion, sir. Mr. BYRNES. Well, there is a bill pending which raises it from $2.3 billion to $2.5 billion. Mr. KILEY. Yes, sir. Mr. BYRNES. The basic law today says $2.3 billion. They had $2.5 billion as part of the 1958 act. But as far as their allocations in 1960, as far as the law is concerned today, my understanding is that it is $2.3 billion, but the Public Works Committee has recommended that that be increased to $2.5 billion. My question relates to the fact of whether you feel that the program should be continued at least at the present rate of $2.3 billion allocation, at least that amount in 1961, in spite of the financial difficulty and the speedup resulting from the 1958 act. Mr. KILEY. By suspension of the Byrd amendment, the Bureau of Public Roads will be in a position to apportion on the basis of the 1956 authorization. Mr. BYRNES. There is no question but that the suspension of the Byrd amendment would let you do almost anything if you wanted to go to the general fund. A suspension of the Byrd amendment means that you can go to the general fund and borrow any amount that you want. Mr. KILEY. Yes, sir; except the Byrd amendment in section 209 (g) and section 209 (d) provides that the trust fund will balance itself out over the life of the program. Mr. BYRNES. That is if you do not overallocate, and if you raise enough revenue so that in that period of time it balances out. Under the overall situation, with the increased costs that are involved here, we know that the trust fund is not going to be able to meet the expenditures within the time period set within the original authorization act. So the trust fund as it presently exists is not going to take care of the costs of the program unless the program is stretched out a number of years beyond 1972 or 1973. Mr. KILEY. Do you mean on the basis of the increased costs? Mr. KILEY. If you do not at the same time supplement with revenues other than user taxes. Mr. BYRNES. Well, you have to supplement it with some kind of taxes. Mr. KILEY. Yes, sir; that is correct. Mr. BYRNES. That is the point I am trying to get it. But you suggest that you continue to go at the present rate rather than recommend any cutback in order to absorb the billion and a half speedup which we experienced as a result of the 1958 highways? Mr. KILEY. That is correct; yes, sir. The CHAIRMAN. Mr. Curtis? Mr. CURTIS. On page 6 you make a statement that there is every reason to conclude that the $38.5 billion originally estimated as trustfund receipts over the life of the program, and so forth. I didn't know we had estimated $38.5 originally. Mr. KILEY. The estimate of $38.5 billion is in the first progress report of the Bureau of Public Roads under section 210 study. Mr. CURTIS. Is that the estimate? Mr. KILEY. They have a table for estimated receipts into the trust fund based purely on highway-user taxes dedicated to the trust fund. In the meantime, that has been increased and now it is estimated that at the present time the tax rates now prevailing, with no increase, will, over the life of the program, bring in about $40 billion. Mr. CURTIS. Where is our deficit on these new cost estimates, then? What is this program supposed to be costing? They estimated $36 billion, and the testimony is that the new estimates for 1958 are $36 billion. Mr. KILEY. That is the first progress report from which I quoted the $38.5 billion of user receipts into the trust fund has an expenditure 44357-59-9 balancing that and initial estimate of cost. In the meantime, they have increased their cost estimates but they have also increased the estimates of tax revenue over the same period of time. Mr. CURTIS. Our original cost estimates were $25 billion. Mr. KILEY. Yes, sir. Mr. CURTIS. And now they have been increased to $36 billion. Mr. KILEY. The $25 billion was the estimated cost of the Interstate System alone. But you will find that they have added to that the 50-50 money for the ABC system, which, in the 1956 act, was authorized for 3 years, but the Bureau has estimated that $900 million that Congress would continue to appropriate Mr. CURTIS. You are including that? Mr. KILEY. Yes, sir. Mr. CURTIS. That is to finance the Interstate System. Mr. KILEY. That is correct. And the trust fund receipts of $38.5 billion would have covered not only the authorizations in the 1956 act, but would have covered additional authorizations which the Bureau anticipated, I suppose, Congress would make in the ABC system during the life of the program. Mr. CURTIS. I understand now. But as soon as you covered it, I didn't realize you were covering the entire program, including the ABC. You are in accord with the administration on one thing, that you think the way to do is just to get more revenue and not to think in terms of possibly cutting this program back to the size, money wise, we really anticipated? Mr. KILEY. I wouldn't say that, sir. You see, one of the problems we are being faced with, as we see it, is that the highway trust fund, by being put on a pay-as-you-go basis, was not able to avail itself of repayable loans. Our position is that the trust fund should be allowed to borrow from the general fund. That money would be repaid out of future trust fund receipts. Mr. CURTIS. I understand all of that. In fact, I agree with your position on it. I have always felt the Byrd amendment was not an economy at all. It was quite uneconomical. But I am refer ring to something that is economy, and that is that in your original estimates of cost being $25 billion, and confining it now to the Interstate System, and now the estimated costs are $36 billion, so you are coming here, and others, apparently, along with the administration, saying that because there is this discrepancy and imbalance of some $11 billion, therefore, let's raise the revenue. I hope somebody comes before this committee with the suggestion of "Let's look at the expenditure side. We thought we were getting something for $25 billion. Now we find out that these estimates are all haywire, and it is $36 billion." I want to take a look again. We in the Ways and Means Committee, in our advice that we gave to the House, thought we could take $25 billion out for this purpose, but we did not even consider taking $36 billion out. I want us to review that aspect, but I hope some citizen groups, too, will be interested in that aspect of the thing. You are just in here arguing now as to who is going to pay for it, not whether we should go for the $25 billion program or the $36 billion program. You accept that. |