As gasoline prices hover around $2 per gallon in many areas of the US, the idea of raising the federal gas tax to fund transportation infrastructure projects is once again being run up the flag pole.
And Thomas Donahue, president of the US Chamber of Commerce, is saluting.
“Isn’t it reasonable to invest a dime or two in roads and bridges and mass transit?” Donahue said during his annual “State of American Business” address at the chamber’s Washington, D.C., headquarters on January 14.
Dramatic Decrease in Gas Prices
Gas prices currently are at historically low levels. Prior to November, the price of gasoline had not dropped below $3 per gallon since December 201. When it fell to $2.93 per gallon on November 3, some gas station owners had to scramble to find the number “2” for their price signs.
While this has been a windfall for US consumers who can pocket the $1.50 per gallon savings, some lawmakers in Congress are proposing a 12 cent per gallon increase in the federal gas tax to build up the Highway Trust Fund, which is used to pay for transportation infrastructure improvements such as building new highways and bridges.
No Increase in 22 Years
The federal gas tax currently is 18.4 cents per gallon for gasoline and 24.4 cents for diesel. It has not been increased since 1993, mostly because few lawmakers were willing to stick their necks out to ask drivers for more money. Meanwhile, funding for the highway fund has dropped 30% since 2007.
But the steep and dramatic decrease in the price of gas has emboldened some lawmakers.
US Sen. Bob Corker (R-Tenn.) has proposed increasing the gas tax by six cents per gallon for two years, for a total increase of 12 cents per gallon. And his proposal has received bipartisan support, as US Sen. Chris Murphy (D-Conn.) has announced his support for it.
Paying for Transportation Infrastructure
The highway fund has been kept from going bankrupt by shifting money around, including $50 billion from the General Fund revenue.These kind of moves are only postponing the issue, something Corker said was “literally generational theft.”
Donahue suggested that the increase could be made more palatable to conservatives who adamantly oppose any tax increase by calling it a “user fee” rather than a tax.
“The simplest and fairest way is through a modest increase in the federal fuel user fee that hasn’t been raised in 20 years,” Donahue said. “I know the politics is difficult, but it’s this the time to try?”
Opposition from the White House
Maybe not, said White House Press Secretary Josh Earnest.
“We don’t believe the best way to fund modernizing our infrastructure is to raise the gas tax,” Earnest said, adding that President Obama is open to “compromise”.
Douglas Holtz-Eakin, head of the American Action Forum, a conservative advocacy group, and a former director of the Congressional Budget Office, had a radically different option for funding the highway fund: Shifting infrastructure costs into the general budget “and force it to compete on a level playing field with other needs.”
Then the existing gas tax of 18.4 cents per gallon could be dropped and gas prices could fall even lower, giving consumers even more money to spend, driving up the economy.