Will We Finally See an Increase to State and Federal Gas Taxes?
The idea of raising the gas tax, which pays for road and transit projects across the country, has been been a political poison at every level of government, across both parties, for many years now. The federal gas tax has been locked at 18.4 cents per gallon since 1993, and many states have gone even longer since raising their own, creating massive gaps in transportation budgets. With fiscal deficits becoming too large to ignore, however, the gas tax appears to be making at least a bit of a comeback.
In recent weeks, Minnesota leaders have pushed for $15 billion in gas tax increases, Massachusetts leaders have revived the gas tax as one of many potential ways to close a shortfall, and Maryland leaders have said they will consider the tax unless the country goes over the fiscal cliff. The governor of Virginia, who has strongly opposed the tax in the past, seems at least ready to keep the measure on the bargaining table. The federal government appears willing to be doing the same.
Earlier this week Politico reported that several Congressmen — most notably incoming chair of the House transportation committee, Bill Shuster — are "open to examining" an increase to the gas tax. A former advisor to the Bush administration told CNN Money, in less tempered terms, that raising the gas tax, as part of a grand budget bargain, seems like the "best way" to pay for transportation. Previous debt-reduction plans, including Bowles-Simpson, have endorsed a rise in fuel charges too.
Still it remains very unlikely that increasing the gas tax would be part of a plan to avoid the fiscal cliff: the Obama Administration has fought hard to keep taxes low for middle-class families, and that's who the regressive tax would hit hardest. In many respects, however, it's a bit misleading to describe a gas tax increase as an "increase" at all. The tax is not indexed to inflation, which means it continually loses value; earlier this year, the Institute on Taxation and Economic Policy reported that state gas taxes, adjusted for inflation, are 17 percent lower today than in 1990 [PDF].
Rob Perks, writing earlier this week at NRDC, offers a clear example of just how much of a "bargain" the current gas tax actually is. Perks shares an anecdote from a recent transportation policy meeting at which Doug Foy, a former consultant to Mitt Romney, compared the cost of gas taxes to the cost of other regular services enjoyed by the American public (bold is Perks's):
Mr. Foy talked about the important networks we all use, enjoy and rely upon — from the cable and fiber optic network to the energy grid to the transportation system. He noted that his own annual bill for cell phone service is over $2000; his cable/internet bill comes in at over $2000 per year; his electric/gas power bill is over $2000 too; and his utilities (water and sewer) topped $1000. Yet the grand total for what he paid last year in federal and state gas taxes (totaling about .40 cents per gallon) to use the transportation network was about $160.
In other words, instead of framing the gas tax discussion as a sudden "increase," it seems just as accurate to say that the big sale on gasoline that's been going on for years is finally ending. For sure, lawmakers must address the regressive impact of new fuel charges; the I.T.E.P. recommends low-income tax credits as one mitigating tool. They might also do well to address the view that what they're asking for isn't to raise taxes on transportation at all — it's to finally collect them.
Top image: Mario Anzuoni/Reuters