The Washington Post reports on how "pension smoothing," an accounting gimmick that's part of the recently passed Highway and Transportation Act of 2014, allows both the feds and the companies that pay the gas tax to avoid reality for just a little while longer.
The law allows companies to put off otherwise mandatory contributions to their defined-benefit employee pension funds, which increases tax revenue for the Treasury, since those contributions would have been tax-deductible. Actually, smoothing increases tax revenue in the short run but decreases it later on, when companies have to make up for the missed payments. But dollars gained exceed dollars lost over the 10-year interval within which Congress, somewhat artificially, calculates the fiscal impact of its policies, so lawmakers can claim that the bill doesn't increase the deficit. Meanwhile, pension plans will be underfunded, exposing the federal pension insurance fund, and the taxpayers who ultimately back it, to greater risk. But who cares about that. For the big companies that lobbied in favor of pension smoothing, the money saved by skipping pension contributions outweighs the cost of losing the tax deduction…. The…problem is the dysfunction of a federal government reduced to running one of its major infrastructure programs on a year-to-year basis, held together with the budgetary equivalent of chewing gum and bailing wire.
Hat tip: Twitter feed of Mercatus Center's Eileen Norcross.
The highway bill shells out over $10 billion a year for infrastructure projects. Last month, Reason Foundation transportation guru Robert W. Poole explained why the Highway Trust Fund was running out of money and why there was no way that a gas-tax increase was up to the task of repairing the nation's highways, bridges, and the like. Poole argues that when it comes to the interstate system—which needs something on the order of $1 trillion in repairs and expansion to meet current traffic needs—the only way to go is with a "true user fee" in the form of tolls. Controversial? Yes. Compelling? Also yes.
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