Federal Gas Tax Hike Proposed

Published in CSP Daily News

Obama's commission recommends gradual 15-cent hike beginning in 2013

WASHINGTON -- Senators Tom Carper (D-Del.) and George Voinovich (R-Ohio) are urging President Barack Obama's debt commission to consider raising the federal gasoline tax to pay for infrastructure projects, The Hill reported. They have written a letter to the chairmen of the National Commission on Fiscal Responsibility & Reform advocating for a 25-cents-per-gallon increase. The commission has proposed a gradual 15-cent hike beginning in 2013.

"We suggest that the commission include an increase in the federal tax on gasoline and diesel as part of your report to [image-nocss] the president," Carper and Voinovich wrote ( click here to view the full letter). "We suggest that the taxes be increased by one cent per month for 25 months--a total of 25 cents over a three-year period."

The lawmakers suggest 10 cents of the tax increase should go to deficit reduction and 15 cents should go to funding transportation infrastructure improvements.

The proposal, however, seems likely to face staunch opposition from Republicans, many of whom ran on a firm anti-tax increase pledge, said the report. Voinvoich, the GOP voice on the letter, is retiring at the end of this Congress.

He and Carper argue that the nation's infrastructure system is beginning to crumble. "The Interstate Highway System is more than 50 years old and many roadways and bridges are reaching the end of their useful life," they wrote. "In fact, nearly 50% of all bridges were built before 1966."

The increase would more than double the current 18.4-cent federal tax on a gallon of gas, the report said.

Both lawmakers sit on the Environment & Public Works Committee.

The letter was addressed to former Clinton White House official Erskine Bowles and former Senator Alan Simpson (R-Wyo.), co-chairs of the commission, which is due to submit its recommendations to Obama by December 1.

In a draft proposal, the commission made a recommendation to "gradually increase gas tax to fund transportation spending: Raise gas tax gradually by 15 cents beginning in 2013 [and] dedicate funds toward fully funding the transportation trust funds and therefore eliminating the need for further general fund bailouts."

Click hereto view the full draft proposal.

And click here to view an accompanying document, "$200 Billion in Illustrative Savings."

In a statement responding to the draft proposal, Carper said, "I was particularly encouraged to see that the co-chairs included a proposal to gradually adjust the federal gas tax by 15 cents to reduce the deficit, create jobs and repair our crumbling transportation infrastructure. I suggested this idea to the commission along with [Voinovich] because America's transportation infrastructure is in dire need of repair. This proposal will address our transportation needs, create hundreds of thousands of jobs and reduce the deficit. One of the clearest messages I heard from election night is that we in Washington need to do more to create jobs and reduce the deficit. The Carper-Voinovich proposal does both and ensures that America's economy will be rebuilt with a 21st century transportation system. This proposal is essential unless we want our transportation system to crumble and our fiscal situation to worsen."

Congress last increased the federal gasoline tax in 1993, under President Bill Clinton, raising it by 4.3 cents per gallon. It increased the tax in 1990, under President George H. W. Bush, raising it 5 cents per gallon. Both times, the revenues went to deficit reduction, said the report.

The senators said that the move would generate $200 billion over five years, with $117 billion allocated to the depleting highway trust fund and $83 billion towards deficit reduction, said the Petroleum Marketers Association of America in the PMAA Weekly Review. The Highway Trust Fund shortfall stood at $65.1 billion for 2010.

Motor fuel excise taxes are not indexed to inflation, it said, leaving lawmakers in a tough position to raise motor fuel taxes during a recession or to cut highway spending programs.

Incoming House Transportation & Infrastructure Committee Chairman John Mica (R-Fla.) is not likely to entertain a fuel tax increase during a recession and many other lawmakers feel the same way, PMAA said. Mica contended that the motor fuels tax does not have to be raised; instead, reductions in transportation funding and increased public-private partnerships will address the highway fund shortfall.

President Obama created the bipartisan National Commission on Fiscal Responsibility & Reformto address the country's fiscal challenges. The commission is charged with identifying policies to improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run. Specifically, the commission will propose recommendations designed to balance the budget, excluding interest payments on the debt, by 2015. In addition, it will propose recommendations that meaningfully improve the long-run fiscal outlook, including changes to address the growth of entitlement spending and the gap between the projected revenues and expenditures of the federal government.