Adding Another 25 Cents to the Price of Gas at the Pump

Sigh….would that revenue be applied to pay off U.S. debt? Nah…

Commerce Secretary Wilbur Ross, who called raising gas taxes a ‘horrible idea,’ says Trump is considering a hike

  • Raising the federal gas tax is one of several options President Donald Trump is considering to pay for infrastructure spending, Commerce Secretary Wilbur Ross said.
  • The president proposed an increase of 25 cents per gallon last week, according to several sources.
  • Ross, who once called raising the federal fuel levy a “horrible idea,” on Thursday said it’s logical to charge drivers for road improvements.

States With the Highest and Lowest Gas Taxes - 24/7 Wall St. photo

Enter the U.S Chamber of Commerce:

The U.S. Chamber has long believed that implementing a modest increase in the motor vehicle fuel user fee (also known as the gas tax) is the simplest, fairest, and most effective way to raise the money that America needs to fund critical upgrades to our roads, bridges, and transit systems.

Earlier this year, and for the first time, we threw out a number: 25 cents. By raising the federal gas tax by 25 cents—five cents per year over five years—we could raise $394 billion over the next decade, and it would only cost the average motorist about $9 a month.

That’s the kind of money we need to be investing in our nation’s infrastructure system. It’s that important, and we won’t be able to build what we need to build if we do it on the cheap.

So far, we’ve seen strong support for our proposal from across the U.S. business community, and a few weeks ago, President Trump indicated his openness to backing a 25-cent increase as part of his administration’s infrastructure modernization efforts.

Despite the momentum that exists to come up with a long-term and sustainable funding solution for America’s infrastructure woes, our concrete and common-sense proposal has met resistance from some corners of Washington, most of it based on incomplete information about the gas tax and the impact of an increase.

To help fill that gap, we’ve compiled five assertions we’ve heard about the gas tax over the last few weeks, and we’ve filled in parts of the story that have so far been missing from the debate.

1. Assertion: An increase in the gas tax is regressive.

Reality: Any user fee, toll, fare, or sales tax is by definition regressive. The fixed fee or tax is larger as a share of income the less the payer makes. A bus fare, for example, costs a larger share of income for someone who makes $30,000 a year than it does for someone who makes $300,000 a year.

The only way to avoid a regressive system of financing our highways and transit systems is to abandon the user fee model altogether and instead fund infrastructure out of general income taxes. Do opponents of adjusting the gas tax really believe a better alternative is raising income taxes and making the current code more progressive?

It is worth remembering that the costs associated with crumbling and substandard infrastructure are also regressive; inaction is expensive.

Forty-four percent of America’s major roads are in poor or mediocre condition. Driving on those bad roads costs U.S. motorists $120 billion a year in extra vehicle repairs and operating costs—$553 per motorist, in fact. Those bills are a bigger burden for low-income drivers than high-income drivers.

Congestion is also stealing time from American families. The average commute time to work has increased by 35 minutes a week between 1990 and 2015. Higher congestion means longer commutes and higher costs.

2. Assertion:  An increase in the gas tax would wipe out the benefits of tax reform.

Reality: The Ways and Means Committee has estimated that the typical family of four earning the median family income of $73,000 will receive a tax cut of $2,059. Based on average household consumption of gasoline, if a 25-cent increase in the motor fuel tax was implemented all at once (and it is more likely to be phased in) the additional fee would only be $285, a very small portion of the average family’s total tax relief.

Let’s not forget that thanks to common-sense energy policies and increased fuel efficiency, families today are paying less for gasoline. In 2008, the average household expenditure for gasoline was $2,715.  In 2017, it is estimated to have been $1,197, a difference of $738. That savings is more than two times greater than the cost of increasing the motor fuel user fee.

3. Assertion: We don’t need to raise the gas tax. Congress should instead cut spending on bike paths and other wasteful items.

Reality: There is no question that Congress should repurpose any wasteful or low-priority infrastructure spending, but funding for so-called “transportation alternatives” is less than 2% of overall federal highway spending. And of that less than 2%, states are already authorized to transfer half of the funds from alternative projects to more traditional projects.

If you eliminated all funding for transportation alternatives, you would reduce the current $138 billion shortfall in the highway and transit trust fund by only approximately 6%. Furthermore, during the last two federal highway authorization laws (MAP-21 and FAST Act), Congress has substantially reduced the number of federally required programs from 112 to 12, therefore focusing limited dollars on programs with the greatest economic return.

Occasionally, critics will claim that “wasteful,” non-highway funding is much higher—say 20% or more of total spending. However, these critics only get to this larger number by lumping in funding for transit programs. The most recent highway bill provided approximately $10 billion a year in funding for transit programs. Since 1983, when President Reagan signed legislation dedicating a portion of the motor vehicle fuel user fee to transit programs, there has been no serious consideration of divorcing transit funding from highway funding. If Congress, were to do so, it would likely only mean that general fund spending would need to be increased to cover transit program spending, meaning no additional money for highways.

4. Assertion: States have already raised their own gas taxes, so there is no need for Congress to do so.

Reality: Support for our highway infrastructure has historically been a partnership between the federal government and state governments, with state government devoting more dollars to building and maintaining our highway system than the federal government. Adjusted for inflation, spending at all levels of government has been on the decline since 2000. State governments are raising their user fees in many cases in order to just maintain their level of support for highway modernization.  If the federal government fails to do likewise, the historic partnership will break down along with our infrastructure.

5. Assertion: Raising the gas tax is politically impossible.

Reality: Thirty-nine states have raised gas taxes since 1993, and some have done it several times.

We haven’t found a single lawmaker who has lost his or her seat solely because of a vote in favor of raising the gas tax. It may be a tougher vote in some regions of the country or for some elected leaders than others, but it’s a vote worth taking. Each and every day, American voters interact with our nation’s roads, bridges, airports, and more, and we believe voters will reward leaders who acknowledge that infrastructure investments can mean more economic growth and more prosperity.

Posted in Citizens Duty, DOJ, DC and inside the Beltway, Energy Agenda, government fraud spending collusion, Industry Jobs Oil Economics, The Denise Simon Experience, Treasury, Trump Administration, Whistleblower.

Denise Simon

Comments are closed.