President Donald Trump recently suggested increasing the federal gasoline tax by 25 cents per gallon to help pay for his proposed $1.5 trillion infrastructure plan.
Last raised in 1993, the federal fuel taxes currently stand at 18.4 cents per gallon of gasoline and 22.5 cents per gallon of diesel fuel. The taxes finance the Highway Trust Fund, which includes two accounts: the Highway Account and Mass Transit Account. The Highway Account is supposed to be dedicated to road and bridge construction and maintenance. The Mass Transit Account funds several mass transit systems.
Diverted from Roads, Bridges
The Highway Trust Fund, created under the Federal Aid Highway Act of 1956, originally involved a tax of 3 cents per gallon to fund the construction and maintenance of the interstate highway system.
In recent years, the Highway Trust Fund has encountered budgetary shortfalls as Congress has allowed or directed millions of dollars in highway funds to be diverted to projects unrelated to building or maintaining roads and bridges, such as construction of visitor centers and nature trails.
In 2008, Congress allocated a $35 billion bailout to rescue the fund from imminent bankruptcy. Congressional Democrats and groups such as the U.S. Chamber of Commerce support raising the gasoline tax.
Trump floated the gas tax increase at a bipartisan meeting of House and Senate committee leaders on February 14.
Congressional Republicans show little enthusiasm for increasing the gas tax, with Bloomberg reporting the day after the meeting House Majority Whip Kevin McCarthy (R-CA) said, “I don’t think there is support for it right now.”
Senate Majority Leader Mitch McConnell (R-KY) has consistently opposed increasing the gas tax over the years, and multiple news outlets quoted Sen. Chuck Grassley (R-IA) saying nothing had changed and McConnell would not support a gas tax increase now.
“He’ll never get it by McConnell,” said Grassley, according to press reports.
It is not clear how strongly Trump will push for a gas tax increase. At a White House Press conference on February 15, Transportation Secretary Elaine Chao said raising the tax is not the administration’s first choice for funding Trump’s infrastructure plan, though nothing is “out of bounds,” as Chao put it.
“The gas tax … is not ideal; there are pros and cons,” Chao said. “The gas tax has adverse impacts, a very regressive impact, on the most vulnerable within our society.”
‘Real Goal Is Higher Taxes’
Grover Norquist, president of Americans for Tax Reform, says raising the gas tax is unnecessary.
“There is no need to raise the federal gas tax,” said Norquist. “The problem is not that the gas tax is too low; the problem is that gas tax revenue is siphoned off to pay for projects unrelated to roads and bridges.
“Supporters of raising the gas tax claim roads and bridges are a priority and higher taxes are needed to pay for them, but by refusing to consider displacing existing spending, they are admitting they view every other spending program—foreign aid, farm subsidies, etc.—as more important than fixing roads and bridges,” Norquist said. “Their insistence on raising the gas tax proves their only real goal is higher taxes on American families. Again.”
Nathan Nascimento, executive vice president of Freedom Partners, likewise says current gas taxes are sufficient to maintain roads and bridges if the revenue is spent properly.
“Washington’s problem in addressing our nation’s infrastructure isn’t a matter of funds; it’s a matter of execution,” Nascimento said. “Hardworking Americans, who are just beginning to see the benefits of historic tax reform through higher paychecks and unexpected bonuses, shouldn’t be left digging deeper into their pockets at the gas pump to pour more money into a broken system Washington refuses to fix.”
Calls for Infrastructure Privatization
Jordan McGillis, a policy analyst with the Institute for Energy Research, suggests privatization is a superior way to repair and upgrade the nation’s infrastructure.
“A better approach to fixing infrastructure than hiking the federal gas tax would be to embark on a program of privatization,” McGillis said. “Private parties are more apt to allocate capital more efficiently to make improvements and expansions on highways and bridges where the market demands them the most.
“Tolls, not taxes, more accurately capture the true costs of road use, for which gasoline purchases and taxes are used as an avatar,” McGillis said. “Americans are already paying about 50 cents per gallon on average to the government when federal and state gas taxes are taken into account. Driving this figure higher is not the solution to infrastructure woes.”
Chris Talgo ([email protected]) is a marketing coordinator and editorial assistant for The Heartland Institute.
Matthew Glans, “Research & Commentary: Gas Tax Hike in California Draws Substantial Criticism,” The Heartland Institute, December 15, 2017: https://heartland.org/publications-resources/publications/research–commentary-gas-tax-hike-in-california-draws-substantial-criticism
Matthew Glans, “Research & Commentary: Unpopular Gas Tax Won’t Cover Costs in Mississippi,” The Heartland Institute, October 12, 2017: https://heartland.org/publications-resources/publications/research–commentary-unpopular-gas-tax-wont-cover-costs-in-mississippi
Matthew Glans, “Research & Commentary: Gas Taxes Are a Poor Option for Funding Illinois Infrastructure,” The Heartland Institute, October 27, 2017: https://heartland.org/publications-resources/publications/research–commentary-gas-taxes-are-a-poor-option-for-funding-illinois-infrastructure
Sen. Chuck Grassley (R-IA): https://www.grassley.senate.gov/; https://www.grassley.senate.gov/constituents/questions-and-comments