Transportation Funding Bill Signed Into Law

After numerous delays, Congress approved in late July a $286.5 billion transportation bill providing funding for road and mass transit construction over the next six years. President George W. Bush, who signed the bill into law on August 10 while visiting a Caterpillar plant in Montgomery, Illinois, said the legislation would provide the resources necessary to upgrade America's transportation infrastructure and promote safety without raising gasoline taxes.

But some critics of the measure, entitled "Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users," (SAFETEA–LU) charge that many of the more than 6,300 special projects contained in the bill are of dubious value.

Safety advocates claim that the pared-down bill, originally slated to cost nearly $400 million, fails to provide sufficient funding for necessary repairs on potentially dangerous roads and bridges. Funding for the bill was cut after President Bush said he would likely veto a bill much larger than $284 billion.

Speaking to workers outside the Caterpillar plant, President Bush said SAFETEA–LU would create jobs and strengthen the economy. "This bill is going to help modernize the highway system and improve quality of life for a lot of people," Bush said. "And these projects will require workers. Highways just don't happen; people have got to show up and do the work to refit a highway or build a bridge. And they need new equipment to do so. So the bill I'm signing is going to help give hundreds of thousands of Americans good paying jobs."

According to the American Road and Transportation Builders Association, every $1 billion invested in federal highway and transit spending creates or sustains 47,500 jobs.

The bill's final passage came after two years of intense negotiations, during which the country was without a transportation act. After the previous act expired in September 2003, Congress was forced to issue 11 temporary extensions allocating emergency funding for highway construction projects.

Stephen E. Sandherr, CEO of the Associated General Contractors of America (AGC), said his organization welcomed the signing of SAFETEA-LU, as it "means that highway contractors around the country will be able to take their businesses off hold, and move forward with this construction season and those to come." 

The legislation contains a number of tax incentives affecting highway use, shipping, aviation and the sale of alcoholic beverages. The largest of these authorizes $15 billion in tax-exempt bonds to finance highway projects and the construction of rail-truck transfer facilities. SAFETEA-LU also:

  • Provides a new tax credit for distilled spirits wholesalers and control state bailment warehouses to compensate for the costs of carrying the federal excise tax on bottled distilled spirits in inventory.
  • Simplifies tax reporting for small businesses paying alcohol excise taxes by permitting quarterly, instead of bi-monthly, reporting.
  • Expands the ethanol tax credit to include alternative fuels and provides a 50-cent excise tax credit.
  • Exempts limousines weighing 6,000 pounds or more from the gas guzzler tax.
  • Exempts tractors weighing more than 19,500 pounds from the heavy vehicle tax. 
  • Increases excise tax exemptions for certain aircraft, alcohol and firearms.
  • Caps the excise tax on fishing equipment.

Among the bill's primary revenue raisers are measures intended to reduce fuel tax evasion.

Top of Page