Raising taxes is never popular. But if there was ever a way to make a tax increase more palatable to Americans, it would be with a tax hike that didn’t seem like much of a tax hike. Like, say, one that was optimally planned so that even after the tax increase was instituted, the average household wouldn’t feel like it was paying much more out of pocket than it was in the recent past.
Just such a rare opportunity is now upon us. Gas prices have plummeted—dipping under $2 per gallon in some markets, with further decreases likely—and some want to take advantage of the situation by jacking up the gas tax at both the state and federal levels. Depending on how high taxes are raised, drivers might very well still be paying less to fill up than they were a few months or a year ago. So in a way, at least theoretically, this is a tax hike that wouldn’t feel like a typical tax hike.
A recent Washington Post column pointed out that the federal gas tax has been stuck at a flat 18.4¢ since 1993. At the time, the price of a gallon of regular was about $1. “It’s been a generation since gas taxes were increased at all,” Paul Bledsoe, a senior fellow on energy at the German Marshall Fund, told the Post. “So they are incredibly low by historic levels.”
Over the years, many have called for increases to the federal gas tax, which has not kept up with inflation. “Inflation has effectively reduced the [gas] tax rate by about one third” over the last two decades, the nonpartisan Tax Foundation noted earlier this year. Most states have flat gas taxes as well, and critics say the revenues collected are falling well short of what’s needed to address our nation’s crumbling infrastructure. “At the state and local levels, gas taxes cover less than half of state and local transportation spending,” said Tax Foundation economist Joseph Henchman.
Again, there’s nothing really new about calls to raise more funds to fix roads and other infrastructure needs at the national and state levels. What is new, however, is that gas is the cheapest it’s been in years, and that projections indicate per-gallon prices will remain well under $3 indefinitely. Predictions call for a national average of $2.94 per gallon next year, which would be roughly 45¢ less than 2014 and 70¢ less what drivers typically paid in 2012.
Hence the fresh push to raise gas taxes while prices at the pump are inexpensive. As Elaine S. Povich of the Pew Charitable Trusts observed recently:
It must be noted that while the federal gas tax hasn’t budged in two decades, state gas taxes (and other local taxes that help support roads and infrastructure) have been increased fairly regularly. Pennsylvania, Wyoming, and West Virginia are among the states where gas taxes were hiked this year or last, and discussions are in the works to raise state gas taxes in Iowa, Utah, Michigan, New Jersey, Oregon, and beyond. Data from the American Petroleum Institute shows that nationally, drivers pay an average of 49.28¢ per gallon when state and federal levies are added up.
While it’s unsurprising that environmental supporters and academics such as Mississippi State’s Sid Salter are renewing cries for gas tax hikes while gas prices are cheap, it’s particularly noteworthy that some Republicans seem in favor of tax increases at this opportune moment in time as well.
Last month, U.S. Sen. John Thune (R-SD) actually criticized President Obama for refusing to consider a gas tax increase over the years. “I always thought that was ironic, that he’s willing to raise every other tax,” Thune said to the Rapid City Journal. “And then the one that actually pays for something you can see a direct benefit from, he doesn’t want to talk about it.”
More recently, Congressman Tom Petri (R-WI), who is retiring soon, it must be noted, announced he is sponsoring a bill to raise the federal gas tax by 15¢ to 33¢ by 2013. “No one likes taxes,” Petri said in a Huffington Post interview in early December:
It helps that the move won’t be quite as unpopular as it would be had the gas tax hike been introduced back when the average driver was paying $3.50 or $3.75 per gallon.