Expenditures from highway trust fund and sources of revenue, 1957–62

11960 budget message of the President, p. M49. Computed by applying proportions between the existing and the new or increased taxes as estimated in report of the Committee on Public Works on H.R. 10660, H. Rept. 2022, 84th Cong., 2d sess., p. 46, to revised estimates of receipts, less refunds, contained in letter from Acting Secretary of the Treasury on financial condition and results of the operations of the highway trust fund, fiscal year 1958, H. Doc. 92, 86th Cong., 1st sess., p. 9. Receipts from the manufacturers' excise tax of 8 percent on trucks, buses, truck trailers, etc., which was already in effect when the Highway Revenue Act of 1956 became law, are not included as receipts from additional taxes.

Mr. BEHLING. Particularly in view of these circumstances, any further diversion of existing general fund taxes into highway trust fund taxes would be wholly unwarranted. Such diversion would require finding other general tax revenues as replacement or incurring future budget deficits.

You have heard before and will again suggestions that general and defense benefits from highways justify the use of general tax revenues in highway financing. This is an excuse, a smokescreen to escape responsibility for highway costs by shifting them from users to the general body of taxpayers, including the railroads. The same fallacious theory of general and defense benefits could be advanced on behalf of any essential industry or any worthwhile economic activity seeking to be supported by general taxpayers.

In the case of highways, the general benefits are nothing more than the transmitted or reflected effects of highways used and available for use. In our kind of economic system the proper place for the costs to be imposed is on the users as the direct and significant beneficiaries.

A contention also heard is that no additional highway user charges should be levied until the section 210 studies of cost responsibilities and benefits shall have been completed in 1961 by the Secretary of Commerce in accordance with directives contained in the Highway Revenue Act of 1956, as amended.

It is true that Congress by these provisions of section 210 has reserved a more final determination of equitable highway user charge structures until these reports have bene submitted and considered. Nevertheless, the inescapable fact is that right now there are immediate financing problems that will not wait. The time for positive action on them is now, without letting them pile up for disposition some years hence. Failure to increase user taxes and revenues on an interim basis now, while letting programed expenditures go on undiminished, would only store up troubles for the future. The financing difficulties would multiply and meanwhile the pay-as-you-go policy

would be shunted aside. Immediate and timely action on the interim financing problem will in no way conflict with the declared intent of Congress to consider further determinations and adjustments of highway user taxes whenever the section 210 studies have been completed and considered by the Congress.

We agree that it would not be feasible now to make final determinations as to equitable highway user tax structures in dealing with the emergency financing problem now before you.

When we appeared before this committee in February 1956, before the Highway Revenue Act of 1956 was enacted, we demonstrated that a tax on motor fuels at a uniform rate cannot by itself produce equitable results as between light and heavy vehicles, for the reason that it overburdens private motorists and owners of other light vehicles with highway costs which the operators of large and heavy vehicles should but would not pay. Hence, the fuel tax must be supplemented with additional and compensating charges on the large and heavy commercial vehicles.

Congress in the 1956 act recognized this fact and made a start, though only a start, toward correcting the fuel tax deficiency by imposing a supplemental tax at the rate of $1.50 a year per 1,000 pounds upon vehicles with taxable gross weight of more than 26,000 pounds. Pending completion of the section 210 studies of highway cost responsibility and of the road test now underway in Illinois, there should be no retreat from the sound principle recognized and in part established by Congress in the 1956 act.

Accordingly, in the emergency financing now to be acted upon by this committee, the special tax on heavy vehicles should be increased at least in proportion to any increase adopted in the tax on motor fuel. Thus, for example, if the rate of fuel tax were to be increased from 3 to 4 cents a gallon, the special tax on heavy vehicles should at least be correspondingly increased from $1.50 to $2 per 1,000 pounds.

At the same time, there should be a greater increase in the tax rate on highway diesel fuel than on gasoline, in recognition of the fact that diesel-powered vehicles obtain about 50 percent more miles per gallon than do similar gasoline-powered vehicles. For this reason the same rate of tax on both fuels cannot be a proper yardstick of highway use.

The only feasible alternatives to immediate increase of user taxes would be:

(1) To stretch out the highway spending program over a longer period of time, or

(2) To substantially reduce the Federal share of the costs of the Interstate Highway program below the present 90 percent.

Those alternatives, as has been brought out in these hearings, would not solve the emegency financing poblem.

If highway users generally are really opposed to increased user taxes, this may mean that they favor a stretchout or a reduction of the 90 percent Federal share for the Interstate System costs. The only other explanation would be that spokesmen for organized highway user groups would have you believe that highway users generally are not willing to pay for what they get and are not interested in holding down burdens on general taxpayers.

As another avenue of temporary escape, it has been suggested that there be resort to borrowing to cover impending deficits in the high

way trust fund. This would further complicate the Government's already extremely difficult problems of debt management and refunding operations.

If, nevertheless, this expedient should be decided upon, and we are not recommending it, such borrowing should be with revenue bonds having a definite first claim on future trust fund revenues for repayment of principal and interest so that no future clamor for "forgiveness" could arise.

With eyes fully open, it should also be recognized that such borrowing would only postpone the necessity of increased user taxes, since there are no future surpluses in sight from existing trust fund taxes with which to service the bonds. Thus, unless the highway program is to be stretched out, the real choice is whether to increase user taxes now or later, with interest as the price to pay for putting off this decision on taxes.

Thank you.

The CHAIRMAN. Dr. Behling, you have already had included in the record the table that you had appended to your statement. Dr. BEHLING. Yes, sir.

Could I also at this time, Mr. Chairman, since there have been references to highways for defense and to the position of the Department of Defense, could I offer for the committee and for the record some excerpt from the testimony made by the Department of Defense witness at the hearings before the House Public Works Committee in 1955?

The CHAIRMAN. That will be placed in the record, without objection.

(Information referred to follows:)

Excerpts from testimony of Maj. Gen. Paul F. Yount, Chief of Transportation, U.S. Army; and witness for the Department of Defense at hearings before the House Public Works Committee on proposals for an expanded highway program-Hearings on H.R. 4260, part I, April 21, 1955

"*** consideration has been given to Army, Navy, and Air Force installations; key industrial areas important to the national defense; principal transportation centers; routes considered to be of strategic importance in the defense of the United States; and efficient highway transportation. Based on these considerations and related matters, it has been determined by the Department of Defense that the National System of Interstate Highways is the principal system of highways to serve the national defense" (p. 158).

"Highways to serve the national defense have been the subject of continuing study between the military staffs and the staffs of civilian highway agencies. As a result, the Department of Defense has designated the National System of Interstate Highways the principal system of highways to serve the national defense. It has done so because it believes a relatively small, uniformly designed, and efficient system of connected highways, interstate in character, is essential to the national defense. In addition, it is clear that the military highway system needs and the civilian highway system needs cannot be economically separated. Accordingly it has been the constant view of the Department of Defense that the highway system needs of the national defense should be provided for by integrating the defense needs to the normal civilian highway programs" (p. 159).

Equipment for the modern Army is much heavier, harder hitting, and faster than was foreseen only a few years ago. The weapons of the future will be the fastest and hardest hitting that can be developed. The trend has been toward heavier weapons. In this connection our objective is to distribute the

military vehicle loads on the pavements and bridges so that defense highway requirements are within the requirements for efficient and effective highway transportation to serve our peacetime economy * (p. 158).

66

*

** the Department of Defense policy is that we will distribute the load or divide it where that is possible so as not to come to the Congress and ask for a special super-supersystem of highways, which would serve only one possible purpose, namely, defense. The highways that meet our civilian needs are also adequate to meet our military needs" (p. 173).

The CHAIRMAN. Are there any questions of Dr. Behling?

If not, Dr. Behling, we thank you for coming to the committee and giving us the enthusiasm that you have expressed.

Our next witness is Maj. Gen. Louis W. Prentiss, executive vice president, American Roadbuilders Association.

STATEMENT OF LOUIS W. PRENTISS, MAJOR GENERAL, U.S. ARMY (RETIRED), EXECUTIVE VICE PRESIDENT, AMERICAN ROAD BUILDERS' ASSOCIATION

The CHAIRMAN. We have known you for a great number of years, General Prentiss. You used to be a part of the Corps of Engineers of the Army. We welcome you to the committee, and we are glad to recognize you to proceed at this time.

General PRENTISS. Mr. Chairman and Congressman Mason, it is a pleasure for me to have this opportunity to appear before you gentlemen, particularly to see you, Congressman Mills, again.

I am Louis W. Prentiss, executive vice president of the American Roadbuilders' Association, with headquarters in Washington. We are a national organization, organized in 1902, with membership representative of the entire highway industry and the highway engineering profession. Our 7,000 members include educators, contractors, manufacturers, material suppliers, highway officials and engineers, consulting engineers, and commercial and investment bankers.

Our major objective is, and always has been, a long-range, balanced, soundly financed highway program in the interests of the economic development of our country, motoring safety, and the requirements of the national defense.

We are grateful for the invitation of this committee to testify.

We have been especially interested in the development and progress of the work on the National System of Interstate and Defense Highways.

The concept of highway planning embodied in the Highway Act of 1956 is very much in harmony with the objectives of our association, with particular respect to the long-range aspects of the program. We believe that such an approach to highway planning, financing, and construction is much to be preferred to a year-by-year, stop-andstart, boom-and-bust method.

As a matter of fact, the American Roadbuilders' Association was called upon, during the lengthy discussions which preceded the enactment of the 1956 act, to make studies leading to an evaluation of the ability and readiness of the engineering profession and highway industry to plan, design, and execute such a broad-scale program to eliminate deficiencies in the Nation's highways.

The results of these studies, which became known as the American Road Builders' Association task force reports, proved to be of great

value in gaging the potentialities of the various components of the highway industry. The findings stated, in sum, that the industry did have the potential capacity to accomplish the mission, provided that action was preceded by wise advance planning. The record of the past 3 years has demonstrated the accuracy of the task force reports.

The highway industry, anticipating the increasing demands required by the implementation of the act of 1956, adjusted itself to meet the changing conditions. This adjustment could not have taken place without the assurance of continuity which is a key feature of a long-range program.

Because of this industry buildup in anticipation of demand, and because of the obvious advantages of being able to make a firm estimate of demand well into the future, we have been greatly concerned by the threats that the timetable may be upset and that the Federal Government may return to a stop-and-go system of financing highway construction. Such a retrogression would be disastrous, not only to the highway industry, but also to our country as a whole.

We are at a stage in our national development at which we must make it possible for economic growth to keep pace with the dynamic growth of our population. Our highways are one of the key factors in a transportation system that is, in turn, a key to our national economic development.

Our membership includes a great number of businessmen, a few large businessmen and many small businessmen. As businessmen and taxpayers, we are wholly in sympathy with and appreciative of the efforts of the Committee on Ways and Means to see to it that the activities of the Federal Government are financed in an equitable and efficient manner.

For the same reason, we can appreciate the concern which committee members have expressed during these hearings with regard to the cost of the Interstate System. The greatest construction project in the history of the world, as it has been correctly termed, does involve the expenditure of large sums of money.

It would be useless, on our part, to duplicate the testimony of other witnesses detailing the cost of completing the Interstate System and explaining the reasons why the estimated price of the system is what it is.

On the other hand, we feel that this committee, in addition to taking due cognizance of the cost of the highway program, should also take note of the benefits to be derived from the completed Interstate System.

For cost, after all, is a meaningful term only when it is considered in relation to the anticipated benefits. An investment of $100 may well be an expensive investment if it will involve a return of only $1 per year, but the same investment becomes much more attractive if a $10 per year return is in sight.

In very much the same way, the estimated cost of the Interstate System is a figure that, to be interpreted, must be studied in relation to the worth of the system. It is pertinent to ask what the completed system will be worth, as a national capital investment.

The question is not easily answered. At the risk of seeming unnecessarily repetitious, I call your attention again to the comprehen