Advocacy

Republicans for Raising the Gas Tax?

from – reason.com – by – Peter Suderman

With gas prices around the country at lows not seen for years, America’s political class smells an opportunity: It must be time to raise the gas tax.

Even some Republicans seem to be open to the possibility. Over the weekend, Sen. John Thune (R-SD) was asked about the possibility of raising the federal tax on gasoline. In response, he gave one of those classic Washington non-answers. “I don’t favor increasing any tax,” he said, “but I think we have to look at all the options.” This another way of saying, “yes, but I don’t want to just say ‘yes’.”

There are two reasons why this issue is coming up now. The first is that there’s a perennial shortfall in the Highway Trust Fund, which funds federal roads projects. The trust is paid for by a fuel tax of 18.4 cents per gallon, which has been level since 1993. Estimates from last summer put the shortfall around $170 billion. It’s currently being funded via an $11 billion stopgap measure that expires in May. The politicos who manage the fund are looking for ways to fill that pot.

That’s the policy reason. But the policy justification isn’t exactly new, and proposals to hikes the gas tax typically haven’t gone anywhere.

As much as anything, this is about low gas prices, which, at least in theory, make it easier to raise federal gas taxes. It’s a kind of tax hike opportunism: Consumers are saving money at the pump, so some of the savings ought to go to the federal government. Even Republicans, typically the anti-taxers in government, aren’t immune from the lure of easy tax hikes.

To be fair, the gas tax proposal put forth by Sen. Bob Corker (R-TN) last summer is revenue neutral, at least in theory. It would hike the federal gas tax by 12 cents a gallon over two years, and index it to inflation going forward, erasing the shortfall in the process. The gas tax hike would be offset by adjustment to the tax extenders package.

It’s not the worst idea imaginable, given the offsets (presuming they actually balance out); it’s a user fee, basically, that funds highway projects by charging people who drive.

But it would add to the pain at the pump for the entire nation, which, it’s worth remembering, already pays about 31 cents per gallon in state fuel taxes and fees, on average, in addition to the federal tax.

A big part of the root problem here is the federalization of highway infrastructure funding. Is Congress really the best organ for making decisions about road projects all around the nation? Some of those decisions, at minimum, are probably better left to the states.

The federalization of highway funding has led to all sorts of problems and perverse incentives, as the Reason Foundation’s Bob Poole noted in congressional testimony last year. Federal involvement raises the cost of projects, and encourages new projects rather than maintenance of existing infrastructure. And funding projects with user fees is politically tricky, making shortfalls more likely, even for projects with merit.

But for some our friends in Congress, it’s easier to take advantage of low gas prices by pushing for tax hikes than address these sorts of core problems.


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PaulE
7 years ago

Standard Washington politics. When we have a temporary reduction in gasoline prices (they will increase back up to $3.00+ a gallon within the next 12 to 18 months for a variety of reasons I won’t outline here), progressive politicians of both parties start pushing tax hikes for a myriad of “worthy causes”. The justification is always something along the line of “With prices this low, the average American will never notice the few cents more and we need the money to fix ____ (insert whatever the politicians are trying to justify)”. The problem is that when gasoline prices return to their normal levels, the tax hikes will all still be in place. They never go away and just keep escalating over time. Thus making the cost of transportation even more expensive.

The Highway Trust Fund is going broke for several reasons. A few of which are billions have been diverted over the years to pay for projects that have nothing to do with the highways themselves and government ineptitude has squandered billions more and waste, fraud and inefficiency on legitimate projects. The solution isn’t to soak the American taxpayers for more money to continue this nonsense, but instead of restrict usage of Highway Trust Fund dollars to the narrow use it was originally intended for. Also the GAO needs to have the power to review and where necessary cancel all HTF project contracts ahead of time to ensure costs paid to contractors and contract terms are in-line with private rates for similar work. Getting awarded a government contract shouldn’t be viewed as “winning the lottery”, which is how it is perceived today.

Of course I am a realist and don’t expect either the Progressive Democrats or the Establishment Republicans to consider any sort of reforms along these lines. The only members of Congress that would agree with these types of reforms would be the fiscally conservative TEA Party types. Unfortunately, they are too few in number at present to puish this type of much-needed legislation through. Still it is important for the American people to understand the real reasons why the HTF is going broke and why they are being “nudged” by members of both parties towards accepting a tax hike.

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