With Budget Shortfalls, Gas Tax Discussion Re-emerges

Dollar Bill in a Gas Pump

The biggest single factor determining the success of advanced fuel-efficient cars is the cost of gasoline. Gas prices go up, and hybrids sales pick up. Gas prices go down, and sales of hybrids and small cars slow down. But despite the correlation—and the call for higher gas taxes from pundits and auto industry leaders like Bill Ford, GM’s Bob Lutz, and Auto Nation’s Mike Jackson—politicians are usually afraid to utter the words “gas” and “tax” in the same sentence.

Yet, tight government budgets for maintaining roads and highways—rather than concerns about the environment, efficiency or oil use—are forcing the issue back on the table.

Sen. Dick Durbin (Dem-IL) is pushing for a new transportation bill to pass by early next year. Speaking earlier this week at a gathering of Midwestern business and political leaders, Durbin wondered how the federal government is going to pay for improving the country’s crumbling highway infrastructure. “We have to pay for it, and paying for it may mean an increase in the federal gas tax,” he said. “Nobody wants to say those words. I’ve said them to you because unless we’re honest about this, we’re not going to see an (adequate) federal highway bill.”

On Monday, New Jersey Governor Jon Corzine said he’ll consider raising his state’s gasoline tax during a second term. Corzine is up for re-election in November and is trying to juggle infrastructure needs with the state’s budget shortfall of approximately $8 billion. Corzine’s other alternative is to diverting money from other programs to pay for transportation projects, such as a $8.7 billion commuter rail tunnel to New York City.

“I’m more than happy to do either one of them, not because I like doing it, but because it’s going to be necessary,” Corzine said during a meeting with The Record’s editorial board. As expected, the governor’s political opponents quickly pointed out that he was pushing for a 14.5-cent-per-gallon gas tax hike last year, but only as “a very, very last resort.” New Jersey’s gas tax rate is the fourth lowest in the nation.

Higher gas taxes will meet opposition at any time, but it will be even more difficult to discuss the issue if gas prices rise back to last year’s record high levels. The window of opportunity might be closing. Last week, the nationwide average price for gasoline rose for the first time in nine weeks. And that was before oil pushed above $75 a barrel this week—its highest point this year—as a plunge in the dollar convinced many investors to pump money into crude.

The national average for regular gasoline is now about $2.50 a gallon—almost 70 cents lower than a year ago. Many analysts believe oil will continue to rise this year. Goldman Sachs expects prices to rise to $85 a barrel by the end of the year.

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  • veek

    Let’s Do It!

    As bad as our government is, I’d rather see them get the money than OPEC. Higher cost for fuel, as undesirable as it may seem, has been among the only sure (and relatively fair) ways to lower consumption and help sell more fuel-efficient cars. When you factor in the costs of wars-for-oil, the social disruption of cheap oil throughout the world (including for oil producers), environmental mega-problems, etc. we have been paying a heavy additional indirect tax on cheap fuel for a long time, and our children will continue to pay it. Oil companies may not like it, but it’s probably better than a windfall profits tax, and oil companies will do OK even with higher fuel costs. Less wealthy people may not like it either, but they bear a disproportionate price for cheap fuel too, and they could receive some legislated tax benefits too. Truckers and transportation people would not like it, and this should be addressed, but at least it is something that can be planned for (rather than in the current environment of highly volatile, unpredictable fuel costs), and the tax could be raised incrementally (say, 25 cents per year for four or five years), which could help planning new purchases even more.

    A gas tax could help us all breathe easier.

  • GR

    It’s about time we talk about this issue. Unless we want to see another bridge collapse in the US (ie: August ’07, MN) then we’ll see that this is the best solution.

    Not only could this give us money for repairs, but it could lead to cleaner airs, less money to foreign countries, and more fuel-efficient cars.

    People will complain about any tax that you bring up. But sometimes it’s just necessary.

  • aaronz

    gas tax all the way make it $8 a gallon so those gas hogs learn a lesson for buying a gas guzzler.
    this is better for everyone
    goverment gets more money=less national debt
    we buy less gas= better for the enviroment

  • Mr.Bear

    After the stimulus bill and health care reform (if it passes) if the Democrats pass a gas tax hike, they might as well tattoo “tax and spend” on their foreheads.

    I’m not saying it’s a bad idea. I am saying it would be political suicide to do it with unemployement approaching 10%. Plan on waiting at least 2 years to make sure job growth is moving in the positive direction first.

  • qqRockyBeans

    I do support a higher gas tax, but I also think it should be raised gradually, being phased-in over a year or two

    Regular Gas or “Petrol”, 93-octane
    increase tax by 1c per week for two years ($1.04 total per gallon)

    Increase tax by 1c every two weeks for 1 year (26c total)

    Straight Petroleum Diesel and biodiesel <20%
    Increase tax by 1c every two weeks for 2 years (52c total)

    Increase tax by 1c every two weeks for 1 year (26c total)

    Increase tax by 1c every four weeks over one year (13c total)

    B99: no tax increase

  • Dave – Phoenix

    It’s about time!!!

    Protecting foreign oil is the hiughest contributor to the federal deficit.That cost should be paid at the pump, not by the federal governent. Increasing gas taxes would allow the gov’t to recoop that cost and balance the budget.

    If we weren’t so in debt from the cost of protecting oil, maybe we would have money to pay for health care……

  • David

    We *have* to pay for our infrastructure and, as long as the money STAYS in the realm of paying for transportation upgrades, I’m all for a gradual increase in the gas tax. A penny a month is not something noticeable. How many months is debateable but it will prevent any “shocks” while assuring more budgetary room.

  • AP

    Gas taxes are addictive for governments. It will be factored into all of the future budgets. But what happens when everybody will move to electric cars, then to cover the budget shortfalls (caused by no one buying gas) the governments will introduce a higher tax something else, lets say on electricity. HMMMM, that seems to be very logical (for example in UK if you put used vegetable oil into a car you must pay tax on 0.27£ per litter to the government). So let’s go on and create GAS TAX addiction 🙂

  • Scott Z

    Oil Fuel (Gas/Diesel) does need to be taxed higher to get us in line with most developed nations. A gradual increase over the next 5 or 10 years should give a fair warning shot across the auto industry’s bow. This should open up the EV and BioDiesel market more.

    AP I have no worries about taxing electricity. Once a good EV is available I plan on adding enough solar panels to fill it up!

  • fairPrice

    Increasing gas tax might reduce unemployment. With the new money coming in, govt. will have enough funds to do repairs to our roads and other infrastructure. And who will do the repair work? The unemployed Americans.

  • nycsolar

    Afterall, the oil companies registered record profits for the last few years. It the price of taxed gas goes too high, the oil companies will have to shrink their profit margins to keep gas prices lower. Win for all, except Exxon Mobil, the world’s most despicable company.

  • Lost Prius to wife

    I’ve seen the TV ads that show a gas pump at $4.00 a gallon and are against increased taxes. They seem to imply that one will be able to keep gas cost low at $2 or $3 for an extended period of time if gas taxes are voted down. Anyone believing that, I’ve got some stock in the Brooklyn Bridge that I will sell them really cheap!

    Taxes are necessary to keep the things that we, as a people, need or want. Since we have no replacement for highways, like Star Trek teleporters, we need to keep those highways in good shape so we can move people and things from point “A” to point “B”. Therefore, it only makes sense to base what oil / gas taxes are to be assessed on what it cost to build and maintain the highways, the main place where the oil / gas is used.

    The only other taxes that should be required are for the usage of those roads. Trucking companies already pay taxes in that area, but maybe the rest of the population needs to add to it. How would we successfully assess and enforce such taxes? That is an almost impossible task which I have no suggestion as to how to go about it. Having toll roads for every single road is not a practical idea. Set fees are not fair to people who use the road very little or a lot. I’m sure someone could come up with a reasonably fair plan. Maybe even our government leaders.

  • Gettta Grip

    The taxes already in place are more than sufficient to keep our highways in tact. In and around DC there is a half a million more people driving than there was 20 years ago. Thats a half million more gas taxes with the same roads.The problem is the politicians that rob from those taxes to go to other projects not related to transportation. Just like they’ve robbed Social Security for other projects. A little clarity on how your city, county, state, federal taxes are spent (wasted) on other not related projects and who is responsible is the answer to several problems. That bridge that collapsed in MN, had money allocated to fix it. Those monies went elsewhere to pay for bigger, useless government. The answer is not to throw more money at it but review the wasteful pork barrel spending first and trim the fat. That will leave more money in everybodies pockets in the end.

  • GR

    Getta Grip: That almost sounds logical except for the fact that gas tax doesn’t rise with the cost of inflation. Therefore, it’s NOT enough.

  • MJ77

    Let’s Do it!

    1. $1 a Gallon gas tax phased in as $.10 every 6 months

    2. All gas has to be at least 10% ethanol (get rid of E85)

    3. All Trucks need to get 20 MPG

    4. All non-trucks need to get 30 MPG

    5. More cash for clunker type programs(tax credit’s for hybrids, EV cars)

    6. Natural Gas for Big Trucks and more money for the railroads.

    It’s not hard… we are almost there!

  • wooac

    A higher gas tax would stimulate more car buying than “Cash for New Clunkers” and higher CAFE rules. If you believe in market intelligence, just raise the cost of gas and let the market decide what gas efficiency. If this doesn’t achieve your average over the entire US vehicle population, raise the gas tax until it does!

    A higher gas tax would also reduce the US dependency on foreign oil. It doesn’t have to be revenue generating. It could be coupled with credits for good health habits on your health insurance, for instance.

  • veek

    Actually, there is one significant governmental problem with a gas tax increase — unlike practically every other Obama program, this one does not significantly add to the Federal deficit and to the burden he will pass on to our children. Nevertheless, it still seems like a great idea.

  • tapra1

    , Durbin wondered how the federal government is going to pay for improving the country’s crumbling highway infrastructure. Dedicated Hosting Reviews