The recent plunge
in oil prices over the past few months has sparked much debate
over whether or not state and federal governments should
increase the gasoline tax in order to raise revenue for much
needed highway construction projects.
The current 18.4 cents per
gallon tax is used to fund the Highway Trust Fund that provides
for highway and bridge replacement and repair costs.
The problem is that in
recent years, vehicles have become more and more fuel
efficient. While less consumed gallons means less revenue
for the Highway Trust Fund, the wear and tear on the
infrastructure continues.
Gasoline prices have fallen
over 40 percent in the past six months. The average retail price
of gasoline in the United States for the week ending January 5,
2015 was $2.308 a gallon. That price is nearly $1.50 less
than the $3.778 consumers paid at the end of June 2014.
Meanwhile, the Highway
Trust Fund is expected to run out of cash in May 2015. At
the same time, the country’s transportation infrastructure is in
precarious condition. The American Society of Civil
Engineers gave the nation’s road and transit system a grade of a
D in 2013. Bridges nationwide did not fare much better, earning
a C+. While the estimated, near $1 trillion dollars, needed to
upgrade the interstate system may seem high, the current
inadequacies of the system costs tax payers billions in delays,
auto repair costs and extra fuel expenses, not to mention
accidents and traffic fatalities.
As the funds pool runs dry,
Congress is searching for money since it last ducked the issue
this past July by obtaining $10.8 billion from pension tax
changes, customs fees, and money reserved for leaking
underground fuel storage repairs. Congress has been
employing short-term approaches since 2008 through a series of
patch-work and temporary fixes while hoping for a politically
achievable long-term solution.
Enter the recent plunge in
gas prices. While a 2013 poll by research firm Gallup
showed that two-thirds of Americans oppose raising state gas
taxes to fund infrastructure projects, gas prices have since
plunged dramatically, suggesting that such a measure might now
harbor a majority of consumer support.
Elected officials from both
parties now see this as an opportunity to strike while the iron
is hot. Still, they are treading cautiously, realizing
that those who support the measure could receive backlash in the
case of a surge in prices later on.
Nonetheless, consumers
should be aware that Congress need only raise fuel taxes by only
10 to 15 cents a gallon to meet all of the obligations of the
Highway Trust Fund. With this, drivers would still enjoy
$2.45 per gallon if prices remained stable. Moreover, that
rate would more closely approximate the 18.4 cents per gallon
that consumers have been paying since 1993 when adjusted for
inflation. Some lawmakers have been proposing similar
inflation inclusive ideas.
In the Senate, Tennessee Republican, Bob Corker, and
Connecticut Democrat, Chris Murphy, have co-sponsored a bill to
raise the national gas tax by 12 cents over the next two years
and allow it to index for inflation. The upside here is
that Congress would not have to vote again to raise the tax down
the road. On the other hand, the marginal tax rate
increase would eat into consumers’ disposable income, something
that many analysts credit for their recent, brighter, economic
outlook.
In conclusion, the recent
dip in gas prices may suggest a rare opportunity to raise the
gas tax in order to raise revenue for much needed infrastructure
repairs. Critical infrastructure funding deserves a
long-term funding solution.
