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Lawmakers use gimmicks to pay for highway funds

Published July 30. 2014 4:00AM

Washington (AP) - The House and Senate have passed competing versions of legislation to prevent the federal trust funds providing highway and transit funds from running dry next month and to buy more time for Congress to draft a new highway bill.

The House measure provides $11 billion to keep the fund solvent through May; the Senate approved an $8 billion measure that would keep the fund afloat through late December. The House is expected to prevail even though its measure relies on a provision known as pension "smoothing" that is widely derided as a gimmick by budget experts.

The House measure's financing provisions are:

• Pension "smoothing." Raises $6.4 billion by allowing companies to reduce the amount that they contribute to their pension funds now and make up for it later. Since pension contributions are tax deductible, companies would owe more tax revenue in the next few years as more of their earnings are taxed. But in the later years, they would be able to claim higher deductions from larger contributions to their pension funds, costing the government revenue. Over time, the pension measure doesn't raise revenue. But over the next 10 years - the time frame used to estimate the cost of legislation - it does. Critics warn it could cost taxpayers in the long run because taxpayers could be on the hook if an insured pension plan can't meet its obligations and has to turn to the government's Pension Benefit Guaranty Corp. for help.

• Customs user fees. Raises $3.5 billion by extending for one year (2024) various user fees paid to the Customs Service for goods, vehicles and people entering the U.S. Critics say it's a gimmick that allows lawmakers to spend the money now and not pay it back for 10 years.

• Leaking underground storage tanks. Transfers $1 billion from an overfunded trust fund established to pay for cleaning up sites fouled by pollution from leaking underground storage tanks, including those at gas stations. Most problem sites have been cleaned up and the leaking tanks fund runs a surplus of about $200 million a year.

A leading Senate alternative by Sens. Tom Carper, D-Del., Barbara Boxer, D-Calif., and Bob Corker, R-Tenn., would provide $8 billion to keep the highway trust fund solvent through Dec. 19. Its provisions include:

• $3.9 billion through extending Customs user fees and transfers from the underground storage tank trust fund.

• $2.1 billion through stricter reporting on mortgages to lessen incorrect tax filings on mortgage interest.

• $1.3 billion by lengthening the statute of limitations regarding understatement of certain capital gains transactions.

• $0.8 billion through withholding Medicare payments to providers that are delinquent on their taxes.

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