Bills
| 3.23.22

Should the Federal Gas Tax Be Increased? (H.R. 1458)

Do you support or oppose this bill?

What is H.R. 1458?

(Updated July 24, 2020)

This bill would increase taxes on gasoline, diesel fuel, and kerosene in 2018 and 2019, with a third tax increase to occur between 2019 and 2029. It would also express the sense of Congress that the gas tax should be repealed and replaced with a more sustainable, stable funding source by 2027.

Specifically, tax rates on different types of motor vehicle fuels would be increased as follows:

  • Gasoline other than aviation gasoline to 26.3 cents per gallon in 2018, 30.3 cents per gallon in 2019, and 33.3 cents per gallon after 2019 and before 2030;

  • Diesel fuel or kerosene to 32.3 cents per gallon in 2018, 36.3 cents per gallon in 2019, and 39.3 cents per gallon after 2019 and before 2029; and

  • Diesel-water fuel emulsion,

The bill would delay the termination of such increased rates from the end of FY2022 to December 31, 2028, and require an adjustment for inflation to such increased rates beginning after 2019.

It would also: 1) increase allocations in the Mass Transit Account of the Highway Trust Fund (HTF) in 2018, 2019, and after 2019; and 2) impose a floor stocks tax on rate increases for gasoline, diesel fuel, and  kerosene (other than aviation-grade kerosene), subject to specified exemptions for exempt uses and low-volume producers.

Argument in favor

The federal gas tax hasn’t been increased since 1993, and as a result funding available for America’s infrastructure needs has fallen short of what’s needed. Increasing it a few cents per gallon in stages will help finance much-needed public transportation, road, and bridge repairs and construction that benefit all Americans.

Argument opposed

Gas taxes are regressive and an increase will hurt Americans’ finances between higher prices for gas and consumer goods. States, not the federal government, are the owners of most highways and roads, and over half — 33 — have already increased their own gas taxes in order to pay for infrastructure repairs, making a federal-level hike unnecessary.

Impact

Drivers; gasoline; diesel; automobile industry; infrastructure; highways; public transportation; Highway Trust Fund; and the Internal Revenue Code.

Cost of H.R. 1458

A CBO cost estimate is unavailable.

Additional Info

In-Depth: Rep. Earl Blumenauer (D-OR) introduced this bill during Bike to Work Week and Infrastructure Week 2017 as part of a series of bills designed to provide tax dollars and financial support to urban and rural communities, creating family-wage jobs, fighting climate change, and making neighborhoods safe, healthy, and economically secure. This specific bill increases the federal gas tax to catch up with inflation and reflect the importance of fuel efficiency improvements:

“[This bill] would increase the federal gas tax for the first time in 24 years to catch up with inflation and important fuel efficiency improvements. With billions of dollars of unmet transit, road, and bridge maintenance that is costing us time and money, we need a more responsible funding approach than kicking the can down the road.”

Expressing support for a previous iteration of this bill in 2015, Laborers’ International Union of North America (LIUNA) General President Terry O’Sullivan called a gas tax adjustment a “no-brainer”:

“Congressman Blumenauer’s proposal for a modest adjustment to the gas tax is a no-brainer for Americans concerned about road and bridge safety. Every day, Americans pay what amounts to a pothole penalty because of the failure of Congress to fully invest in our nation’s crumbling roads, bridges and transit."

On the other side of the debate, the usually anti-tax and Republican-leaning U.S. Chamber of Commerce has promoted a five cent per gallon per year increase in the federal gas tax over the next five years. Some Congressional Republicans, including Sen. John Thune (R-SD) also support the idea. Sen. Thune floated a gas tax increase in early 2015 as part of a plan to replenish the Highway Trust Fund, and raised the idea again in late 2017 amid reports that the Trump administration was preparing a major infrastructure initiative.

In a meeting with members of Congress in February 2018, President Trump reportedly expressed support for a 25-cent gas and diesel tax increase phased in over five years and dedicating that money to improving roads, highways, and bridges. Sen. Tom Carper (D-DE), who was present in that meeting, said President Trump “came back to the idea of a 25 cent increase several times throughout the meeting” and “even offered to help provide the leadership necessary so that we could do something that has proven difficult in the past.”

Bob Lutz, CEO of VLF Automotive, an American-based automotive company and a former vice chairman at General Motors, argues that repairing aging infrastructure is worth the price of gas tax hikes, which are minimal and unlikely to even be noticed by most customers:

“We’ve got the cheapest gasoline in the civilized world. A nickel here or a dime there, with the weekly fluctuations in gasoline prices, nobody’s even going to notice it. A crumbling infrastructure like that, whether it’s roads, bridges or whatever, is a drain on the economy. It causes problems. It slows transportation, [and] it creates accidents.”

Chris Edwards, director of tax policy studies at the Cato Institute, believes that raising the federal gas tax would be “misguided,” and argues that it wouldn’t do much to improve infrastructure:

“98 percent of U.S. streets and highways are owned by state and local governments, and the owners should do the funding. States that need to improve their highways can increase their own gas taxes, sales taxes, issue debt, add user charges, or pursue public-private partnerships. There is no advantage in raising federal highway revenues rather than the states raising their own. The states can tackle their own infrastructure challenges, and about half of them have raised their transportation taxes in the past five years. Supporters of a federal gas tax hike say that the tax has not been raised since 1993, and its real value has been eroded by inflation. That is true. But the federal gas tax rate more than quadrupled between 1983 and 1993 from 4 cents to 18.4 cents, as shown in the chart below. The 4-cent rate would be 9.8 cents in today’s dollars, so the real gas tax rate has risen substantially since the early 1980s… [T]he states have steadily raised their own gas taxes in recent years. API discusses state gas taxes here, and they emailed me data back to 1994. (I’ve interpolated a few missing years). The state average—currently 33 cents—includes both gasoline excise taxes and other taxes on gasoline… Funding for highways and other infrastructure should be handled by state and local governments and the private sector.”

Americans for Tax Reform also and Americans for Prosperity also oppose raising the gas tax, arguing that doing so would hurt middle-income Americans, likely encourage more non-highway related spending, fail to solve the HTF’s deficit, increase the price of consumer goods, and negatively impact economic growth.

This bill has the support of 28 cosponsors, all of whom are Democrats, as well as the support of the American Road & Transportation Builders Association (ARTBA). In previous iterations, it’s had the support of the AFL-CIO, U.S. Chamber of Commerce, AAA, American Trucking Associations, American Society of Civil Engineers, American Road and Transportation Builders Association, American Public Transportation Association, League of American Bicyclists, Transportation for America, and more.


Of Note: In 2011, the Federal Highway Administration (FHA) estimated that over $70.9 billion in repairs were needed just to maintain safe bridges. Similarly, in 2015, the American Society of Civil Engineers estimated that surface transportation in the U.S. requires over $2 trillion to remain economically competitive by 2020.

Over the 2013-2018 period, over half of states have enacted their own legislation to increase transportation funding by raising their own state gas taxes. From 2010-2018, over 33 states raised their own motor fuel taxes, and some also indexed their gas taxes to inflation so they’ll go up as construction costs rise. Yet other states are trying gas tax alternatives, such as mileage-based user fees, or a tax on vehicle miles traveled that will tax electric and other alternative fuel vehicles that contribute to wear and tear on roads, but don’t use gas.

The Institute on Taxation and Economic Policy (ITEP) notes that, due to inflation and fuel-efficiency gains paired with a near-doubling of highway construction costs from the nineties to 2018, the federal gas tax rate’s purchasing power has fallen by nearly 66 percent.


Media:

Summary by Lorelei Yang

(Photo Credit: iStockphoto.com / MajaMitrovic)