Federal fuel tax debate bears watching
To pay for repair and upkeep of their roads and highways, several states in recent years have boosted their fuel taxes. Might Congress do the same to help states meet their infrastructure demands?
The answer may well be yes. As The Wall Street Journal's Gerald Seib noted recently, this is one issue that is gaining bipartisan support — even the U.S. Chamber of Commerce, no fan of higher taxes, supports a plan to boost the federal tax (now at 18.4 cents per gallon) by 25 cents over the next five years.
Thomas Donahue, president of the chamber, told the House Ways and Means Committee recently that the federal gas tax hasn’t moved since 1993. “How many people in this room can live off the same paycheck you earned in 1993?” Donahue said. “No one? Our nation’s roads, bridges and transit systems can, either.”
The static fuel tax rate, along with vehicles that get much better gas mileage than years ago, have combined to diminish the value of the federal Highway Trust Fund, whose revenues are disbursed back to the states. In fact, the fund has been running at a deficit.
The tax proposal would produce about $400 billion over the next decade. Seib notes that conservatives generally don’t like any tax increases, and liberals are uneasy with gas taxes because they can disproportionately pinch lower-income folks.
However, he notes, “the idea is alive because of a widespread belief that the nation’s infrastructure is worn out,” and because with a gigantic federal budget deficit, there aren’t many places to get $400 billion.
Democrats are fond of infrastructure projects, Seib writes, because they translate into union construction jobs. And, the party’s environmental wing favors initiatives that may help reduce the use of fossil fuels. On the other side of the aisle, better infrastructure is good for business.
Across the country, the legislatures in red states and blue states have approved fuel tax increases.
Alabama approved a gas tax hike last month. Oklahoma and Missouri did so last year (although Missouri’s plan was later overturned by voters). In 2017, seven states — California, Indiana, Montana, West Virginia, Tennessee, Oregon and South Carolina — passed fuel tax increases, according to the National Conference of State Legislatures.
New Jersey increased its state fuel tax in 2016, following a year in which eight other states (Georgia, Idaho, Iowa, Washington, Utah, South Dakota, Michigan and Nebraska) did so and two others (Kentucky and North Carolina) tweaked their tax structure to limit decreasing revenues.
Seib points out that many members of Congress from both parties worry about the political hit they could take for backing any tax increase. However, he writes, this issue “represents a test case in whether a divided capital awash in trivial controversies and angry Twitter-fests can manage a serious debate on an important policy idea.” It bears watching in the months ahead.