What Happened to the Proposed ‘Transportation Tax’ on Wall Street?

For several weeks last fall, as members of the House infrastructure
committee pushed for passage of a new six-year federal transportation
bill as a strategy to rouse the economy from recession, a
proposal to pay for the legislation with a small tax on oil futures
trades attracted a healthy crop of Democratic cosponsors and some vocal
pushback from Wall Street.

Rep. Pete
DeFazio (D-OR), at left, joined Sen. Tom Harkin (D-IA) to introduce a
Wall Street transaction tax in December. (Photo: AP/Oregonian)

But the tax proposal has since lost steam in Washington
transportation debate, getting little notice from lawmakers who strongly
support taking up a new six-year infrastructure bill in 2010 even as it
remains a magnet for progressives looking to rein in financial industry
excesses.

What happened to the idea of using an oil futures transaction fee
— set at 0.02 percent in a December bill offered by Rep. Pete DeFazio
(D-OR) and Sen. Tom Harkin (D-IA) — to fund long-term federal
transportation projects?

Jim Berard, spokesman for the House infrastructure panel, explained
in an interview late last week that the Congressional Budget Office
(CBO) had conducted a preliminary analysis that found the transaction
tax would raise less money than lawmakers had initially hoped. The
reason for the lower-than-expected revenue, Berard said, was the
rationale hinted
at by House Speaker Nancy Pelosi (D-CA) in November: a tax levied
only on domestic futures would end up pushing trades overseas.

“What sounded like a really good solution six months
ago turned out to be not as good as we thought, and just not as viable,”
Berard told Streetsblog Capitol Hill.

That leaves federal transportation policymakers essentially where
they were at this time last year, searching for a politically feasible
stand-in for a gas tax increase that the White House and congressional
Democratic leaders have both
ruled out for now.

Even as raising the gas tax to pay for transport legislation
remains unpopular, senators are preparing to release a new climate
change bill later this month that
would impose a new “linked fee” on motor fuel. Such a fee could be
used in part to fund new infrastructure projects, but Sen. Lindsey
Graham (R-SC), one of the architects of the new climate measure, told
The Hill last month that most of the resulting revenue would be
sent back to drivers in the form of rebates.

The infrastructure panel’s highways and transit subcommittee,
chaired by DeFazio, plans a
hearing next week on “innovative financing” strategies, and Berard
said panel chairman Jim Oberstar (D-MN) continues to search for a
revenue plan that can unify the capital’s disparate transportation
players — House and Senate leaders, the U.S. DOT, the White House,
state DOTs, reform groups, and transit advocates.