Gas tax hike to fund infrastructure?

As the Trump administration prepares to unveil its long-awaited infrastructure plan, some conservatives and fossil fuel interests have launched a lobbying campaign against a gasoline tax increase as a way to finance it.

Trump is widely expected to present a large program to upgrade roads, bridges, railroads, and energy transportation projects in his state if the union address tomorrow. While many accounts say it will represent costs of over $1 trillion, nobody has a clue about how Trump would pay for it. The reports indicate that the administration will offer some $200 billion in federal funding for its infrastructure program, with the rest coming from private-sector funds and state and local government funding. The implication is that states and localities will have to raise their taxes, undercutting the administration’s recently passed federal tax plan.

The administration hinted last October that it might push for an increase in the 18.4 cents/gallon federal gasoline tax. The tax on diesel fuel is 24.4 cents per gallon. The Washington Post reported that Trump’s economic advisor Gary Cohn told House members in a meeting that the administration was pondering the idea of a gasoline tax increase.

Tom Donohue

The U.S. Chamber of Commerce, the nation’s most powerful business lobbying group, earlier this month called for a 25 cents/gallon increase in the federal gasoline tax. Tom Donohue, the group’s president, said, “Five cents [per year] over five years, but if we can get it all in the beginning, we’d take it. It’s simpler; you do it once,” Donohue told reporters. “You begin to accrue and build up a sock of money which you’re going to need for these projects.” The chamber’s proposal could raise some $375 billion over 10 years.

A gasoline tax hike is unpalatable to a large swath of Republican lawmakers in Congress, particularly those who represent oil and natural gas producing states. It raises the specter of “new taxes” just after the GOP engineered what Trump claims is the largest tax cut in U.S. history, although that is a dubious claim. “I’m not for raising the gas tax,” Senate majority whip John Cornyn of Texas told a private group of Republican donors a week ago. “It’s going to be a declining source of revenue.”

Koch brothers

The Cornyn comments came at a meeting organized by billionaire businessmen and conservative funders Charles and David Koch. The Koch brothers, through their well-funded lobbying groups Freedom Partners and Americans for Prosperity, wrote Trump Jan. 23, advising him that “increasing the federal gas tax to fund new infrastructure projects would be the wrong approach. Not only would it undermine the benefits of recent tax-cut legislation, it would disproportionally hurt the least fortunate – who pay a higher percentage of their income in energy costs – and lead to higher prices on goods and services throughout the economy.”

The last increase in the federal gas tax came in 1993 under President Bill Clinton. He had campaigned against a gas tax increase in 1992, proposing a broad-based BTU tax instead. But Republicans in the Senate, and some Democrats, balked at the economy-wide BTU tax. The Senate Finance Committee, led by the Democrats, decided to substitute a 4.3 cents/gallon gas tax increase, which passed the Senate without any Republican votes.

The gasoline tax has stayed at 18.4 cents since, and it is not linked to inflation (although some states and localities have inflation-linked gasoline taxes). Since 1993, inflation has increased by about 65 percent. According to a Wikipedia analysis, in 2017federal, state, and local motor fuel taxes averaged 49 cents per gallon for gasoline and 55 cents/gallon for diesel.

— Kennedy Maize

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