(1) return primary transportation program re-
sponsibility and taxing authority to the States, 
(2) free States’ transportation dollars from 
Federal micromanagement, earmarking, and budg-
etary pressures, 
(3) enable decisions regarding which infrastruc-
ture projects will be built, how they will be financed, 
and how they will be regulated to be made by per-
sons best able to make those decisions, 
(4) eliminate the current system in which a 
Federal gasoline tax is sent to Washington and 
through a cumbersome Department of Transpor-
tation bureaucracy, 
(5) prohibit the Federal Government from forc-
ing unwanted mandates on States by threatening to 
withhold transportation money, and 
(6) achieve measurable congestion mitigation 
and infrastructure preservation and safety in a cost 
effective way subject to available resources. 
SEC. 2. FEDERAL TAX ON FUELS DECREASED BY AMOUNT 
OF INCREASE IN STATE TAX ON FUEL. 
(a) IN GENERAL.—Subpart B of part III of sub-
chapter A of chapter 32 of the Internal Revenue Code of 
1986 (relating to special provisions applicable to fuels tax) 
is amended by adding at the end the following new section: 
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‘‘SEC. 4106. REDUCTION IN RATES OF TAX BASED ON IN-
CREASE IN STATE TAX RATE. 
‘‘(a) IN GENERAL.—Under regulations prescribed by 
the Secretary, the rate of tax imposed under section 4081 
with respect to any fuel and the rate of tax imposed under 
section 4041 with respect to any liquid shall be decreased, 
but not below 2 cents per gallon, by the applicable State 
tax rate increase with respect to such fuel or liquid. 
‘‘(b) APPLICABLE STATE TAX RATE INCREASE.— 
For purposes of this section, the term ‘applicable State 
tax rate increase’ means, with respect to any fuel or liquid, 
the excess, as periodically determined under tables pre-
scribed by the Secretary, of— 
‘‘(1) the rate of tax imposed by the applicable 
State on the sale or use of such fuel or liquid, over 
‘‘(2) the rate of tax imposed by the applicable 
State on the sale or use of such fuel or liquid as of 
the date of the introduction of the STATE Act. 
Any increase in the rate of tax imposed by any applicable 
State on the sale or use of any fuel or liquid shall be taken 
into account under this subsection only if State law pro-
vides that such increase is to be taken into account under 
this subsection. 
‘‘(c) APPLICABLE STATE.—For purposes of this sec-
tion, the term ‘applicable State’ means the State which 
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is determined under regulations prescribed by the Sec-
retary as— 
‘‘(1) in the case of a liquid to which section 
4041 applies, the State in which such liquid is sold 
or used, or 
‘‘(2) in the case of a fuel to which section 4081 
applies, the State in which such fuel is most likely 
to be sold or used. 
‘‘(d) REQUIREMENT
TO
MAINTAIN
INTERSTATE 
HIGHWAY SYSTEM.—Subsection (a) shall not apply with 
respect to any fuel or liquid if the applicable State with 
respect to such fuel or liquid has not entered into an 
agreement with the Secretary of Transportation under 
which such State has agreed to provide for the proper 
maintenance of that portion of the interstate highway sys-
tem which is within such State.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Section 9503 of such Code is amended by 
striking subsection (d). 
(2)(A) Paragraph (4) of section 9503(e) of such 
Code is amended to read as follows: 
‘‘(4) REDUCTION IN RATE OF TRANSFER BASED 
ON REDUCTION IN STATE TAX RATES.— 
‘‘(A) IN GENERAL.—There shall be sub-
stituted for each amount in paragraph (2) an 
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amount which bears the same ratio to such 
amount as the aggregate reduced tax rate bears 
to the aggregate unreduced tax rate. 
‘‘(B) AGGREGATE REDUCED TAX RATE.— 
For purposes of subparagraph (A), the term 
‘aggregate reduced tax rate’ means, with re-
spect to any amount for any calendar year, the 
amount of tax that the Secretary estimates will 
be imposed with respect to the liquid or fuel to 
which such amount relates for such year after 
application of section 4106. 
‘‘(C) 
AGGREGATE
UNREDUCED
TAX 
RATE.—For purposes of subparagraph (A), the 
term ‘aggregate unreduced tax rate’ means, 
with respect to any amount for any calendar 
year, the amount of tax that the Secretary esti-
mates would have been imposed with respect to 
the liquid or fuel to which such amount relates 
for such year if section 4106 did not apply for 
such year.’’. 
(B) Subparagraph (A) of section 9503(e)(2) of 
such Code is amended by striking ‘‘sentence’’ and 
inserting ‘‘subsection’’. 
(3) The table for section for subpart B of part 
III of subchapter A of chapter 32 of such Code is 
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amended by adding at the end the following new 
item: 
‘‘Sec. 4106. Reduction in rates of tax based on increase in State tax rate.’’. 
(c) EFFECTIVE DATE.—The amendment made by 
this section shall apply to liquid or fuel removed, entered, 
sold, or used after the date of the enactment of this Act. 
Æ 
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