Forget Raising the Federal Gas Tax, Congress May Let it Lapse

August 12, 2011

For years, many transportation and fuel efficiency advocates have called for a hike in the federal gas tax that would put fuel prices in the United States on a more even ground with countries like Germany and the UK, where taxes are several times higher than the 18.4 cents tacked onto every gallon of gas sold here. If fuel costs were higher the argument goes, Americans would be more reluctant to buy gas guzzlers, and look more to vehicles that can get them from point A to point B while using as little gas as possible. Indeed, surveys and consumer behavior both strongly indicate that fuel efficiency becomes a higher priority for car buyers the more expensive gas gets.

Earlier this year, the presidents of the AFL-CIO and U.S. Chamber of Commerce—usually natural enemies in Washington—came together to encourage the Senate to raise the national gasoline tax for the first time since 1993. Though participants at the hearing acknowledged the limited political feasibility of such a measure, it was clear that quiet support for new tax hike that would increase revenue to the federal Highway Trust Fund to rebuild road infrastructure, has been building.

In January, General Motors CEO Dan Akerson told The Detroit News he favors raising the tax by as much as $1 per gallon to help encourage consumers to buy more efficient vehicles.

Now, in the aftermath of a national debt ceiling battle that saw anti-tax advocates victorious in their call that no new tax revenue be raised to help balance the federal budget, a new fight over the nearly 80-year-old federal gas tax seems to be on the horizon. Grover Norquist, the influential president of Americans for Tax Reform—who has seen a new wave of Republican lawmakers take up his fight to drastically slash both taxes and federal spending—told Politico last week he’d like to see the tax expire, and favors leaving the funding of transportation infrastructure to individual states.

Though few elected officials are on the record calling for an outright elimination of the gas tax, the idea of reducing it or temporarily suspending it has been raised several times over the years when gas prices have spiked. And with Congress at a standstill on a range of funding and taxation issues, rumors have been circulating that Republicans may dig their heels in yet again over extending the tax, which expires on September 30.

If the tax is reduced or allowed to lapse, states would be left to increase their own gas taxes and take on a greater role in funding their own infrastructure repairs. But in states like Georgia, where Gov. Nathan Deal has chosen to block a scheduled increase in the state fuel tax in an effort to hold down gas prices, that could prove to be politically difficult in itself.

The fight re-raises an issue that has come up time and time again in battles over the expansion of domestic oil production, Corporate Average Fuel Economy standards, and even labeling schemes for vehicle tires: do small, short-term cost savings outweigh the need to improve the longterm efficiency of American vehicles? Would establishing a gas price floor (with the difference made up by the gas tax) help bring stability to the economy and vehicle market? Those debates may be coming down the road, but for the time being, the question on the minds of many transportation advocates is whether the gas tax will even exist anymore come October.


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  • MrEnergyCzar

    They should raise it 50 cents per year for 10 straight years so people can know that there will be a floor on the price of gas……

    MrEnergyCzar

  • Charles

    Warning: Political Rant!

    Grover Norquist and his TEA Party friends do not understand the world. They seem to be greedy and incredibility misinformed. TEA stands for Taxed Enough Already, but we are at 50+ year lows for the tax rates. The country’s infrastructure is falling apart. With high unemployment rates, this is the time to rebuild the infrastructure. It is going to be years before the housing bubble foreclosures will allow construction workers to get back to normal employment levels.

    I know we need to get the debt under control. I have been yelling for decades about the stupid debt not being paid down in good and average times. We are in really bad times. Jobs, jobs and more jobs need to be the number one priority.

    In survival training you learn to kill what is going to kill you first and worry about the other stuff later. In other words prioritize. So cut the budget will it will not hurt employment, like letting Medicare bargain for drugs like the VA. That would save $140 billion over the next ten years. Please do not get me started on Iraq or how we really messed up in Afghanistan.

    So raise the gas tax slowly over the next 2-5 years. Repeal all of the Bush tax cuts. Reduce spending on anything that does not employ people.

    For fun go to the following site to play budget director:
    http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html?choices=43tl39qu
    The link is to my trade offs.

    End rant.

  • SteveMD

    Brilliant! Now even President Eisenhower, conquerer of the Nazis, Republican stalwart and creater of the interstate highway system is now a socialist in Tea Party eyes!

    What’s next? CARB, founded by Reagan? Nixon’s EPA?

  • Brent McDonald

    The tax and spend approach hasn’t worked too awfully well for the past three years.
    We need to cut wasteful spending FIRST. Close tax loopholes and REALLY get out of Iraq and Afghanistan. Once that is done we won’t need to raise taxes.

    I played with your site and was able to SMARTLY balance the budget with 25% of the savings coming from taxes where yours had 60% coming from taxes.

    http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html?choices=43tl39qu

    Stop spending other peoples hard earned money!!!!!!!

  • Scott

    We haven’t *used* the tax and spend approach in the past three years, nor in the past 30. We’ve used the /borrow and spend/ approach, which is worse, especially in good economic times when we could easily have afforded taxes. Maybe we should try tax and spend for a change, since it’s actually a relatively untried concept!

    Oh, and before you talk about “other people’s” (don’t forget the apostrophe) hard earned money, read a little about what a “public good” is and how they must be paid for. And then don’t ask me to provide you with absolutely vital public goods without paying your fair share for it.

  • Yegor

    Buck to the subject: I think that it is a bad idea to give care of interstate highways to individual states. They are by definition INTERSTATE highways!
    Otherwise if one state decides (for example like Georgia right now) not to raise their taxes or for some other reason not to take care of their portion of interstate highway so the other states will suffer because cargo and people will have to take a detour – more gas will be burned, huge highway investments would be lost.

  • Joe

    The TEA party jerks need to stop painting everything with the same brush. The highway system is not free and it needs upgrading. The Federal government, not states, needs to maintain it because it is critical to interstate (and international) commerce. Deferring the maintenance to the states will result in patchwork quality similar to what happens with road/bridge quality between counties. The gas tax should be set to a rate that is sufficient to cover the cost to maintain these roads and bridges, preferably a little more to force drivers to cover the subsidization of the oil & gas industry and then some more on top of that to cover the health costs from automotive pollution. If TEA party folks were real economists and not just reactionary idiots, they would realize that this not a tax but a necessary business cost of using & maintaining an infrastructure. With a properly set gas tax rate, the price of gas would truly reflect the actual cost of driving.

  • Max Reid

    In a way this is good. Let the states take care of the highway, in this case, they will apply the tax on gas as much as they need. If they don’t maintain the roads properly or apply same toll for both bigger and smaller vehicles, then the people may simply start taking bus rides which will bring down the gas consumption.

    As more EVs and Plugins come to the market, slowly the revenue for Fed & States will decline since these vehicles consume less gas. Then there will be a Toll System. Ideally the Toll system should be based on vehicle’s weight, so that bigger vehicles pay more. Lets see.

    Motoring is not cheap. We have to pay for what we use.

  • Charles

    Max Reid, I think there is an advantage to the whole society for a good transportation system. Therefore I think some funds for the system should come out of general revenues. Other funds from the people who use the systems. Part of your airline ticket price goes to the FAA (unless congress mucks that up again) to support the air traffic systems. Your gas tax goes to roads. Ticket costs go to Amtrak or your local bus/train system. Not all transportation is equal in cost to society. Individual cars cost society more than the same number of people on buses. I would like to see the part of the cost paid by the user to be proportional to the cost to society. A carbon tax would work well and encourage people to select better transportation. A toll system is costly to implement (does have the advantage of more jobs) and maintain. I have never seen a toll system based on weight. At best it is based on number of axles, which approximates weight rather crudely. Weight and road damage is not linear. Double the weight and you get about 8 time the damage (I found this in the past, I hope IRC). If heavy trucks had to pay biased on the damage they cause, trucks would only be used to ship goods the last few miles, and trains would handle all of the long haul duties.

    Bottom line, I agree that “Motoring is not cheap. We have to pay for what we use.”, but I think a carbon tax and damage tax beats tolls.

  • Mr.Bear

    Or you could look at GasBuddy’s website and save $160 in membership dues.

    If the federal gas tax expired even conservative governors from conservative states would freak out over the loss of highway funds.

  • Max Reid

    Charles :

    In 1950s Congress allotted some $75 billion to build the interstate highways and this is the money America earned by exporting goods to Europe and other countries. These highways did a lot of good for this country by helping people go from 1 place to another.

    However today people have started buying massive vehicles which apply so much pressure and the roads break up after rain & snow. Add the 18-wheelers used by companies. So we are just enjoying what is laid in 1950s and in the coming years, it will cost more and more to maintain these roads. Apart from the gas tax also 2% of our income taxes goes for highway maintenance.

    Its high time, we also use other means of transport like Air & Rail and Bus so that we don’t spend more money on road maintenance. Ideally there is going to be a meter in every vehicle and at the end of the month the DMV will sent a bill to every household and based on the vehicle’s weight and miles drive they can calculate the toll cost. This will be fair for everyone whether you own a Gas powered vehicle or EV or Flexfuel vehicle.

    This will also encourage carpooling. Its the money drain of dollars to OPEC countries that has brought this worst recession and the rating cut from AAA to AA.

  • Charles

    Max:

    I agree with all but your last sentence. I think the reason S&P cut us from AAA is from the political debacle of not doing a simple debt ceiling increase. The recession had a few more causes. Like the home mortgage CF. This recession will be really hard to get out of because of the TEA Party and that housing is going to be down for at least four more years. No need to build houses when so many cheap foreclosed homes are on the market. Does not matter who we elect, the housing market is not a fixable problem. We maybe able to change the time/max pain ratio, but that is about it.

    I am making an assumption that the toll is in addition to an at the pump carbon tax. The carbon tax pays for the pollution and the toll for ware and tear. When you look at the amount of ware and tear a Prius does, you may not want to spend the money to send the bill.

  • Max Reid

    Yes Charles

    Carbon tax is good, but I dont think any Americans are ready to accept that. Nor the Germans, they are going to replace nuclear with coal which means they dont want to pay carbon tax. Neither the Japanese as they are replacing Nuclear with Fossil fuels.

    As for the ceiling, we cannot keep on increasing. If the debt crosses 100% of GDP, it will trigger an automatic rating cut. Already the Chinese Agency has cut the rating to AA and now to A. Currently the debt is 98% of GDP. The more the debt, the more the interest payment which is going to be in addition to oil bills.

    But the good news here is that the price of solar panel has gone down to $2.84 / watt as per solarbuzz. Expect Solar to start replacing Coal in the next 5 years.

  • Tim Eum

    I don’t think we all have the correct facts to make the judgment of whether the gas tax should be continued, remain status quo, or be raised. The facts we need are the figures on how much does it cost to maintain status quo, how much does it cost to build planned roads, and how much more is needed to build needed roads/bridges that are not yet planned? I believe that our current tax structure already puts billions of dollars into road construction — do we really need any more? Rather than pontificate on general bias, it would be better if we took a rational business case study of what extra revenues (taxes) are needed or whether this is an area where we can actually cut back on.

  • Tim Eum

    I don’t think we have all the correct facts to make a judgement on whether taxes need to be cut, remain the same, or be raised on this issue. The facts we need are the true costs for maintaining out infrastructure as is, what it would cost to continue building planned improvements, and what it would cost to build improvements that are needed but are not yet planned. We also need to know the safety impacts and other facts associated with each alternative. Let’s use a rational business case approach to deciding whether more or less revenues (taxes) are needed.

  • Charles

    As for needing more facts. Here are three:
    1) We have about a $140 billion in bridge repairs and replacement that are needed.
    2) The highway trust fund has a balance of about $21 billion.
    3) The fund will collect about $36 billion this year.

    Please note I just picked bridges that are deficient or need replacement. That does not include the about 1/2 trillion dollars needed to do all of the other work.

    So Tim, I do think we need the money. It is also a good time to do the repair work. So man construction workers are out of work, and this should be able to go on until the housing industry gets back on its feet in a few years.

  • Octavius

    I may be a staunch Republican, but I do believe that if you want to have a federal highway system (and I do want one) then it should be funded at the federal level, and I do not see a problem in funding it by a user tax such as the federal gas tax, since that pings the direct beneficiaries moreso than some other less direct mechanism. Perfect no, better than any alternative I know of, yes.

    At the same time I vigorously oppose those who would raise the gas tax for purely punitive reasons, e.g., the GM executive who supports a $1 increase/gallon. In general, an excise tax is regressive, taking a whole lot more out of the back pockets of the poor (in terms of percentage-of-income) than it ever will for the high-rollers. There are lot of poor folks (and small businesses) in this country that are currently struggling just to keep a roof over their heads, and the very last thing they need is punitive level of taxation that is levied totally without regard to ability to pay — that, indeed, would be the cruelest tax.

  • AP

    Don’t paint every Tea Party member with the same brush. I am in the Tea Party, but I support at least maintaining the current level of gas taxes. I DO NOT want to stop every for tolls – they do this around Chicago and it drives you crazy!

    That said, the Federal government has shown itself untrustworthy at every turn over the last 30-40 years. We always want to raise taxes, and then promise to (eventually?) cut spending… except the spending cuts never seem to come.

    So, first cut spending, to build trust in the political process, then evaluate tax increases. I just hope we can actually follow through and cut. Obamacare alone could bankrupt us (Oh, yeah, we already are!).

  • fluffy

    i think we should do away with all taxes , every time turn around it is taxes on this or that, cars. food property taxes , gas where is it going to end at, they say the money goes to fix raods and bridges , well how come the majority of our raods are in such bad shape , pot holes and not to mention them metal plates the d.o.t . puts down and seems to never take up, I bet if somebody looked into where the tax money really goes , I would bet most of it don’t even go for roads , yeah gm is pushing higher gas taxes so they can sell more cars , i for one think if the government quit looking out for us and what they say is best for us we all would be alot better off, with this hard times the last thing anyone needs is another tax increase , but like they say death and taxes are 2 things we all can be sure about and with the politicans we have at federal , state and local , they are going to tax us to death

  • tapra1

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