U.S. President Donald Trump has said as far back as May 2017 he would be open to considering raising the federal gas tax as a means of funding infrastructure investment, but questions remain as to whether Republican lawmakers would support such a move.
U.S. President Donald Trump has reportedly asked Congress to consider a $0.25 increase to the federal gas tax, the primary funding mechanism for the Highway Trust Fund (HTF), as a means of paying for infrastructure investment.
Trump floated the idea to senior administration officials and a bipartisan group of lawmakers in a White House meeting on Feb. 15, according to a report from Axios news service, but this wasn’t the first time the president has proposed raising the gas tax.
Back in May 2017, Trump told Bloomberg News he would “certainly consider” raising the federal gas tax to help rebuild aging U.S. infrastructure like roads and bridges.
Republican lawmakers, however, have long opposed a gas tax hike, some because voters would likely view it as an additional tax burden, while others argue the tax is not a sustainable, long-term funding solution, since vehicles are steadily becoming more fuel efficient and people are relying less on cars.
The federal gas tax, which has remained at the same level for nearly 25 years, is currently 18.4 cents a gallon for regular gas and 24.4 cents for diesel.
As a result, the HTF only brings in about $34 billion annually, compared with the $50 billion the government spends each year on transportation projects.
The roughly $16 billion per year shortfall has led Congress to bail out the HTF with more than $40 billion from the Treasury over the past decade – money that necessarily comes from borrowing or diversion from other programs.
The American Association of State Highway and Transportation Officials (AASHTO) has for years been calling on Congress to fix the “broken” HTF before its funding authorization expires in 2020, but thus far, legislators have been unable to agree on a sustainable source of additional revenue.
Shortly after Trump took office last year, AASHTO and several other industry groups – including the American Public Transportation Association, American Association of Port Authorities, American Council of Engineering Companies, the U.S. Chamber of Commerce and AFL-CIO, to name a few – wrote a letter to Trump and both chambers of Congress urging them to find a long-term, user-based revenue source for the HTF and not to rely solely on private funding for the administration’s infrastructure investment plan.
The Trump administration on Feb. 12 released a $200 billion infrastructure proposal it says will generate a total of $1.5 trillion in total investment over the next 10 years, once state, local and private funding is included.
Several high-ranking congressional Democrats panned the proposal, with House Transportation and Infrastructure (T&I) Committee ranking member Peter DeFazio, D-Ore., calling it “embarrassingly small” and T&I member Rep. Alan Lowenthal, D-Calif., saying it resembles a “skeleton” with “no meat on it.”
Senate Commerce Committee ranking member Bill Nelson, D-Fla., however, struck a more conciliatory tone, saying he plans to work with committee chair John Thune, R-S.D., and fellow committee members “to try to come up with a bill that can garner broad support and include ideas from both parties.”
According to the Axios report, a White House spokesperson said on Feb. 15 that Trump “is focused on his four priorities: spurring $1.5 trillion of infrastructure investment, cutting down the burdensome permitting process from 10 years to 2, providing funding for rural infrastructure, and investing in workforce development,” adding that the president “has said everything is on the table in order to achieve those goals.”
“The gas tax has its pros and cons, and that’s why the president is leading a thoughtful discussion on the right way to solve our nation’s infrastructure problems,” the spokesperson said.
Chris Spear, president of American Trucking Associations (ATA), applauded President Trump’s “big and bold vision for strengthening American infrastructure.”
“Because it is a user fee, the fuel tax is the most conservative, cost-effective and viable solution to making that vision a reality,” Spear said in a statement. “Ninety-nine cents of every dollar goes directly to road and bridge maintenance, and it doesn’t add a penny to the deficit. There’s a reason why Ronald Reagan twice signed this idea into law.”
Some conservative lobbying groups, however, were much less keen on the idea of raising the gas tax in order to help the federal government pay for infrastructure.
Americans for Tax Reform (ATR), a nonprofit, taxpayer advocacy group that “opposes all tax increases as a matter of principle,” said in a statement that raising the federal gas tax, which it describes as “one of the most regressive taxes in existence,” is unnecessary.
ATR further argued the federal gas tax “disproportionally affects lower-income people, who see a more substantial portion of their paychecks go towards energy” and took issue with the timing of Trump’s suggestion, being that he just signed sweeping tax cut legislation into law in December. According to the group, a recent study by Strategas Research found that a $0.25 increase in fuel taxes, coupled with rising prices at the pump, would negate 60 percent of the savings individuals could expect to receive from the recently enacted Tax and Jobs Act.
“It seems politicians in Washington can’t help themselves,” ATR said. “While Americans are just starting to feel tax relief from President Trump’s tax cuts, some in Congress are already floating the idea of a federal gas tax hike.”
“There is no need for a gas tax hike,” said ATR President Grover 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 that 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 that they view every other spending program – foreign aid, farm subsidies – as more important than fixing roads and bridges,” he added. “Their insistence on raising the gas tax proves their only real goal is higher taxes on American families.”
Americans for Prosperity (AFP) and Freedom Partners Chamber of Commerce, both of which are funded in part by billionaire businessmen and political activists Charles G. Koch and David H. Koch and aim to promote “the benefits of free markets and a free society” via limited government regulation and taxation, echoed ATR’s sentiments.
“Increasing the gas tax is the wrong approach to addressing our nation’s infrastructure needs,” said AFP Chief Government Affairs Officer Brent Gardner. “The American people are just beginning to feel the benefits of the recently passed tax cuts bill. Instead of undermining the relief taxpayers just received, the president and Congress should focus on smarter spending and breaking through the regulatory gridlock that delays projects and drives up costs. The taxpayers deserve nothing less.”
Meanwhile, across the country in California, state GOP lawmakers are reportedly pushing to repeal a three-month-old state gas tax increase officials say has helped fast track dozens of road and bridge repairs.
The legislation (SB 1), which went into effect in November, raised the state gas tax by $0.12 per gallon, and is expected to garner an additional $54 billion in revenue for infrastructure programs over the next decade.
“The proposed repeal of SB 1 would not only rob our state and local governments of vitally needed state funding, but now we learn that it could also hamper our ability to receive federal funding,” said Matt Cate, executive director of the California State Assn. of Counties, according to a report from the Los Angeles Times.
According to an analysis from Bloomberg in early 2017, at least 14 other states have considered raising gas taxes in order to fund transportation infrastructure investments, and another 19 states and the District of Columbia have increased tax rates since 2013.
New $0.25 gas tax for infrastructure?
