STATEMENT OF REPRESENTATIVE DONALD F. McGINLEY, OF

NEBRASKA

Mr. MCGINLEY. Thank you, Mr. Chairman.

Mr. Chairman, the problems incident to the financing of the Federal highway program are of dual importance to me: First, as a Member of the House of Representatives, we must find the solution and, second, because my State of Nebraska is embarking on a 400-mile sector of interstate highway construction.

I think that at the outset it would be well to set some guidelines inside of which, in my thinking, the problem areas lie and the answers are to be found.

(1) While a pay-as-you-go amendment was added to the Federal highway program act, I do not believe that the committee, as this program was first visualized, thought that this was of paramount consideration. The fact that, because of economic conditions, this provision was set aside is reason enough to allow this legislative body to consider an answer to the present problem without inflexible restraint by this provision. As a matter of fact, the deviation from this principle during the time of recent economic crisis has created much of the present situation and further departure should only be considered a part of the original action.

(2) The suggestion of obtaining a greater percentage of the excise taxes collected from automobiles and accessories is, to me, an indirect method of taking the necessary moneys from the general fund. This is because the void of revenues, which are now being used to finance programs, caused by diverting of these funds would necessitate these programs to go to the only other source available—that is, the general fund.

Taking these two areas into consideration, I feel that the most logical method of making up the deficits in the Federal highway program fund is to go directly to the general fund.

Two other points I think should be made here. One is a local situation with me and the other, a general statement which I would classify an axiom of the times.

The general statement is that the road program must be advanced at its originally planned pace both because of the need and because of the false economy that would result in delay. Costs continue to rise which would alone result in eventual higher cost of road construction if delayed. The energies of many State highway departments have been channeled into the Federal highway program planning and staffs and work schedules are based on the presumption that this program will advance as proposed.

The local situation as regards Nebraska is that gasoline tax has been used as a primary source of revenue and that further increase would meet with serious opposition within the State. Nebraska now has 7 cents of State gasoline tax.

The idea of pay as you go is commendable but is worthy only as far as it is workable. Beyond that it must not become a sacred cow.

The second idea that highway costs should be financed by direct use tax is fine up to a point. But the obvious benefits to be derived both on a primary and secondary level would justify-if not demand-other financial aid. I refer here to the use of the Federal highway system

for defense. In Nebraska, for example, the interstate highway is expected to increase traffic across the State 70 percent or more. Certainly the direct benefits to restaurants, hotels, and motels, in addition to service stations, will be a factor. Perhaps this added transportation facility will permit location of additional industry in our State and generally result in higher property values.

The safety factor of modern, controlled access highways to accommodate people who will be traveling could certainly be estimated in terms of saved lives, heartaches, and material expenses.

In conclusion, I cannot encourage this committee too strongly to take whatever steps it must to keep this highway program going. I know that the chairman and his committee possess the ability and courage to develop a workable solution to this present problem.

The CHAIRMAN. Thank you, Mr. McGinley for coming to us and giving us your views on this subject.

Mr. McGINLEY. Thank you, Mr. Chairman.

The CHAIRMAN. We will now hear from our colleague, the Honorable Thomas G. Morris, from the State of New Mexico. We are happy to welcome you, Mr. Morris.

STATEMENT OF REPRESENTATIVE THOMAS G. MORRIS, OF NEW MEXICO

Mr. MORRIS. Thank you, Mr. Chairman.

It is a pleasure to appear before this committee to present my views on possible methods of bolstering the financial resources of the Federal highway trust fund.

Since the initiation of the current Interstate Highway program 3 years ago, we have seen tremendous strides in financing and construction of various segments of our proposed 41,000 miles of highway network. This advanced system of highways will reduce the grave toll of lives taken on many of our present death-ridden highways. The statistics on the minimization of the death rate on controlled-access highways has indeed been impressive. To use a geographically close illustration, safety reports show that the Shirley Highway in Virginia has a fatality rate of 0.8 deaths per 100 million vehicle-miles as compared with a death rate of 10.6 on parallel U.S. No. 1. Other modern highways such as the Baltimore-Washington Parkway-Expressway and others have similarly fine records as compared to older roads from which they have diverted most through traffic. It has been conservatively estimated that the Interstate Highway System will result in reductions of $1.4 billion in annual highway accident costs. The current highway program also continues Federal aid for the long-supported program of construction and improvement of primary, secondary, and urban roads.

As to the financial benefits already being derived by individuals and businesses as a result of the current highway program, we will not have a complete picture until 1961. At that time the U.S. Department of Commerce is required to present to Congress a report which will include comprehensive information on direct and indirect beneficiaries of the program. We do, however, already know that the program has induced a high level of activity in many industries such as the roadbuilding machine industry and suppliers of roadbuilding materials, only to mention a few.

It is unfortunate that now we face a curtailment of this highway program, which thus far has been highly successful, unless we find adequate funds for financing the program during the fiscal years 1960-62. Under section 209 (g) of the Highway Revenue Act of 1956, which is often referred to as the Byrd amendment, the full amounts authorized to be appropriated for the highway program cannot be apportioned to the States if the estimated revenues accruing to the highway trust fund will not be sufficient to defray required expenditures from the fund. The 1958 act suspended this provision for the 1959 and 1960 fiscal year apportionments in order that the interstate program could progress as scheduled. Primarily as a result of this action the highway trust fund will have an estimated deficit in the fiscal years 1960-62, and no apportionments for fiscal year 1961 may be made. For 1962 only $500 million can be apportioned.

The problem that we face is that many of the States have already obligated a large share of the 1960 funds which have been allocated to them and unless allocations for 1961 are forthcoming many of these States will find it necessary to retrench their roadbuilding programs. In his statement before the House Appropriations Committee, Mr. Tallamy, the Federal Highway Administrator, presented information showing that as of March 31, 1959, 18 States were already using 1960 funds under the interstate program. For example, Ohio had used 98 percent of their allocated funds for 1960; California, 52 percent; Florida, 43 percent; and so on. My own State, New Mexico, has obligated 33 percent of its interstate apportionment for 1960. The same general situation exists under the primary, secondary, and urban programs, which are also financed by the highway trust fund.

The immediate problem facing the Congress is determining how we can avoid the estimated deficits in the highway trust fund for fiscal years 1960-62. My primary purpose today, therefore, is to propose a solution to this problem. The proposals are simple. I will outline

them.

First of all, although the taxes imposed on commodities consumed or used by highway users make up the trust funds which finance the highway program, there are certain other highway user taxes which go into the general fund of the Treasury rather than earmarked for the highway program. I refer particularly to the 10-percent manufacturers' excise tax on passenger automobiles. The only part of the tax on automotive vehicles (which includes the taxation of passenger automobiles) that goes into the highway trust fund is 50 percent of the taxes collected on trucks, buses, and similar vehicles. In fiscal year 1958 the tax on automotive vehicles, parts, and accessories amounted to over $1.5 billion while the amount transferred to the trust fund (which represented the tax on trucks, and so forth) was only $110.5 million. The difference is quite a substantial amount, especially when we realize that the entire amount of taxes transferred (less refunds) in fiscal year 1958 represented only a little in excess of $2 billion.

Second, on February 24, 1959, I introduced H.R. 4942 proposing an additional tax upon imports of petroleum with the proceeds to be deposited into the highway trust fund. Such legislation would provide the necessary finances for the trust fund as well as some measure of protection to the petroleum industry which has suffered a tremendous decrease in domestic exploration and development for the third

consecutive year. In case of an emergency, our Nation will need all possible domestic sources of petroleum and I feel we must see that exploration continues at a high rate for the national welfare. Thus, enactment of this legislation would serve this twofold purpose.

The receipts of the trust fund could be reinforced also by eliminating the preferential tax relief to dividend recipients and using the revenues which would result from full taxation of dividends for the highway program. If we are going to deprive the general fund of these revenues anyway, it would be far better to remove preferential treatment in favor of a few and use the revenues for purposes which will directly or indirectly benefit virtually everyone.

I know of no recent official estiamte on how much revenue loss results from the provision which allows the dividend recipient to exclude the first $50 of dividends received ($100 on a joint return if the husband and wife each receive at least $50). However, I am certain that it exceeds the $46 million loss estimated for fiscal year 1955 when the provision was first enacted. The law also allows a tax credit equal to 4 percent of dividends received in excess of the excludable amount. According to the latest data published by the Internal Revenue Service, taxpayers who filed taxable returns were allowed tax credits amounting to $282 million in 1956. Taxpayers having incomes of over $25,000 received 58 percent of these tax credits, although they represented only 1 percent of taxable returns in that year. Taxpayers with other $100,000 represented only five one-hundredths of 1 percent of taxable returns in 1956, but received 20 percent of the tax credits in that year.

My last proposal does not affect tax revenues but consists of borrowing through issuance of securities which would be paid off with trust fund tax receipts. Although proposals have been made to borrow from the general fund, I think it is preferable that borrowing be accomplished through the trust fund itself. Perhaps a Federal highway authority could be set up for a temporary period and issue short-term revenue bonds in the name of the highway trust fund. These borrowed funds could be used to offset the temporary deficits between revenues and expenditures of the trust fund, and the bonds could be retired later during the program when revenues are in excess of expenditures.

I have attempted today to provide a brief setting to the financing problem of our highway building program, the need for the program, and what we stand to lose if we curtail the program at this time. I have also offered four proposals whereby we can overcome our temporary problem of financing the program. It is my earnest desire that the committee give full consideration to these proposals because a large segment of our economy, including my own State of New Mexico, depends on the continuance of the program at the same rate as it has progressed thus far. An irreparable loss can be suffered from inaction on this needed legislation.

Thank you.

The CHAIRMAN. Thank you, Mr. Morris, for coming to us and giving us your views on this subject.

Mr. MORRIS. Thank you, Mr. Chairman.

The CHAIRMAN. We will now hear from our colleague, the Honorable George E. Shipley, from the State of Illinois. We are happy to welcome you, Mr. Shipley.

STATEMENT OF REPRESENTATIVE GEORGE E. SHIPLEY, OF

ILLINOIS

Mr. SHIPLEY. Mr. Chairman, I want to thank you for this opportunity to appear before you this morning in opposition to an increase in the Federal gasoline tax.

The administration has proposed a 11/2-cent increase in Federal taxes on gasoline, which represents an increase of 50 percent, making the total Federal excise tax 412 cents per gallon, as the only method of continuing the vital interstate and defense highway construction program. The Federal-Aid Highway Act of 1956 provided for establishment of a highway trust fund to finance the construction program. Highways were to be built through user taxes deposited to the trust fund so the program would be paid for by the end of the construction period. I am firmly convinced that there are alternatives in handling the current difficulties in connection with the trust fund and that adding to the burden carried by the American motorist is the worst possibel solution. Should the interstate and defense highway construction be brought to a halt because Congress does not levy increased taxes on gasoline, the responsibility for losses incurred by stopping the program must clearly rest with the President and his administration. An economic factor involved in consideration of a gasoline tax increase is that about 88 percent of the foreign motorcar purchases made by Americans are because of gasoline economy. Increase in cost of gasoline will tend to increase the trend to foreign car purchases with loss of manufacturing in American industry.

An increase in gasoline taxes, making automotive fuel more costly, would also discourage highway travel, and adversely affect many small businesses dependent on serving the motoring public. The reduced gasoline consumption resulting from increased cost would reduce State revenues and further impair adequate financing of highway requirements by the States. The existing gasoline tax is far out of line with taxes on comparable products, amounting to 38 percent, whereas luxury taxes are about one-fourth as much.

Increase in gasoline taxes and consequent higher cost of motor vehicle fuel would add to the cost of nearly every consumer item. Particularly important would be the increase in the cost of moving farm products from farm to market since nearly all of them move by truck. Taxes on gasoline and oil, plus other excise taxes levied on motor vehicles, tires, parts, et cetera, constitute a heavy toll on the driving public. A further inequity of these taxes is that a very considerable portion of the revenues are diverted to uses other than for highways. Excise revenues from passenger automobiles alone are over $1.2 billion annually. The motoring public is not getting what it pays for in gasoline and oil taxes, and diversion of these moneys forces them to pay more than their share of General Government expenses. The tax increase would be unnecessary if the 42 percent of the Federal excise diverted were deposited to the highway fund. In the past 2 years $2.9 billion Federal highway-use tax revenue has been diverted from highways to other uses. In the next 12 years an estimated $14.5 billion will be diverted unless the practice is discontinued. A total of $3.3 billion revenue was collected in these taxes in 1958 and $1.2 billion diverted to other than highway use.