Chamber of Commerce Suggests Gas Tax Increase

gas_pumpsMore fuel efficient vehicles and high gas prices are impacting gas demand, spurring the talks on taxes.

This week, the House Budget Committee held a hearing on the solvency of the Highway Trust Fund (HTF).

Testifying before the Committee: Robert Poole, Reason Foundation; Richard Geddes, Cornell University; and Janet Kavinoky with the U.S. Chamber of Commerce.

Revenue into the HFT has been inadequate in recent years partially because vehicles have become more fuel efficient—hence—less taxable gallons. Also, volatile gasoline prices have prompted motorists to drive less and conserve fuel.

In 2008, Congress injected $8 billion dollars from the Treasury’s general fund and another $7 billion in 2009 to keep the Highway Trust Fund afloat. Motor fuel excise taxes have not been increased since 1993 and are not indexed to inflation.

Recently, House Transportation and Infrastructure Committee Chairman Bill Shuster (R-PA) said a long-term funding solution for highway infrastructure should be part of the broader tax reform bill.

Similar to what the National Commission on Fiscal Responsibility and Reform, commonly known as the Simpson-Bowles Commission, Kavinsoky suggested that motor fuels taxes should rise from the current 18.4 cents-per-gallon (cpg) level to around 30 cpg to keep the HTF solvent past 2015. Currently, the HTF is spending $15 billion more annually than the revenues it receives. Additional HTF options include: tolling, vehicle miles travel (VMT)—a user fee based on miles traveled—and public-private partnerships.

Gedde advocated for VMT as a way to shore up the HTF for future years. Specifically, he said mileage-based user fees should be variable with costs adjusted depending on the time of day someone is driving. Rural lawmakers suggested user fees should be based on which highways motorists use, such as making it cheaper to drive on country roads compared to big city highways.

House and Senate Committees will be holding additional hearings to better define the problems and the solutions.

  • AustrianSchool

    It’s just so simple: make the gas tax a PERCENTAGE of the fuel price rather than a fixed fee per gallon. This way, as the price of gasoline keeps moving up with the march of inflation, so will the revenue collected that is need to maintain the roads we’ve already built.
    Also, if people are driving smaller cars less miles because of the cost of driving, then you actually need LESS revenue to maintain the roads because they are being worn out at a slower rate from less and lighter use.

    • AverageRandomJoe

      Road and its infrastructure, while wearing by cars is part of the maintenance so variable costs by usage, need fixed amounts of maintenance cost regardless of usage due to weather wear or time.

      • AustrianSchool

        Agreed. But your total costs are still reduced by people driving smaller cars less miles. One thing for sure is you don’t have to expand the road system if people are driving less because they can’t afford it as much anymore. BTW, how did you know about this story to comment on my comment?

        • AverageRandomJoe

          True, you don’t need to expand and people drive less, and I would suspect that you would actually be able to rid some roads as such happened. And there would be fewer costs, it just wouldn’t be the same coefficient.

          I follow you on Disqus so all your comments are on my feed. I just saw your comment as I was going through.

          • AustrianSchool

            I had a feeling it was something like that. I usually blog Bloomberg but I alway have my eye out for gas tax related stories. There seems to be a concerted effort on the part of some large player to transition away from the gas tax to a different method that insulated the costs of driving with the use of the roads such as using general tax to pay for roads or some kind of annual odometer reading, per mile tax. Being a good libertarian I’m of course in favor of use fee type taxes and the gas tax is about as good as it gets, my only complaint is that they haven’t been keeping it up with the road costs so are instead subsidizing driving related costs with general taxes. This encourages people to drive larger cars longer distances because they aren’t confronted with the cost each time they fill up. We just get larger budget deficits, traffic jams, and polution.

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