Higher Gasoline Taxes and Infrastructure: An Idea Whose Time has Come?
The Issue: President Trump recently floated the idea of raising the federal tax on motor fuels by 25 cents per gallon as a way to pay for improving the nation's roads, highways and bridges. Federal taxes on motor fuels (gasoline and diesel) have historically been important sources of funding for highways and mass transit. But the revenues derived from these taxes have been decreasing and falling short of existing needs. While some business interests, such as the U.S. Chamber of Commerce currently favor raising the tax, it has faced staunch political opposition over the past decades.
Fuel taxes have not changed since 1993 so, adjusting for inflation, the federal gasoline tax is well below its 1960 value.
The Facts:
U.S. federal taxes on motor fuels are low when compared to those in many other advanced economies. U.S. federal taxes are currently 18.4 cents per gallon of gasoline and 24.4 cents per gallon of diesel. Consumers pay an additional amount per gallon in state taxes, which averaged 28.3 cents per gallon for gasoline and 29.3 cents per gallon for diesel at the start of 2018. Fuel taxes range widely from one state to another. For instance, Alaska charged nearly 9 cents per gallon of gasoline while the state of Washington charged 49.5 cents per gallon as of February 2018 (state-by-state fuel taxes can be downloaded here). Nonetheless, Americans on average pay much lower fuel taxes per gallon than their counterparts in other advanced economies: while U.S. consumers pay on average about 50 cents per gallon in combined federal and state taxes, people in many European countries pay over $3 in taxes per gallon of gasoline (see here).
Federal taxes on motor fuels have fallen over the past twenty-five years after adjusting for inflation. At the federal level, these taxes were first levied in 1932 and were important for the financing of the Interstate Highway System in the 1950s and 1960s. These taxes have not changed since 1993 so, adjusting for inflation, the level of the federal gasoline tax has trended down steadily since 1993 and is well below its 1960 value (see chart).
Federal taxes on motor fuel have provided less and less support for infrastructure over time. Since the Federal-Aid Highway Act of 1956, revenues from these taxes have flowed into the Highway Trust Fund and have been an important source of funding for highways and mass transit. Up until 2008, revenues collected generally covered the outlays from the fund. In recent years, with the level of taxes falling in inflation-adjusted terms, and with an increase in the fuel efficiency of cars and trucks, this source of revenue has gone less and less far. In terms of revenue generated, federal excise taxes on gasoline and diesel have accounted for the bulk of the total $40.9 billion estimated tax revenue that went to the Highway Trust Fund in 2017 (see here). However, this revenue has run well below expenditures for highway and transit programs (see here and page 182 here.) For this reason, Congress has had to transfer a total of about $143 billion to the Highway Trust Fund since 2008 to cover shortfalls.
There is widespread agreement that the U.S. surface transportation infrastructure is in need of renewed investment. As reported by the U.S. Government Accountability Office, the oldest portions of the Interstate Highway System are approaching 60 years of age, and 10 percent of the nation's bridges were rated as structurally deficient in 2015. Moreover, bridge conditions are likely to worsen as a larger fraction approach the end of their 50-year design life. In addition, the American Society of Civil Engineers has given poor grades to the country's roads and bridges and estimated an $836 billion backlog of highway and bridge capital needs in 2017. To address these widely recognized shortfalls, President Trump has put forward a $1.5 trillion dollar infrastructure program. The plan proposes to use $200 billion of actual new federal funding, with the hope that state and local governments and public-private partnerships will make up the rest. However, significant funding from those sources seems unlikely given budget constraints as well as the effects of tax reform on the municipal bond market, an important source of infrastructure funding. (See this EconoFact analysis on the options for infrastructure finance and this one on tax reform and the municipal bond market.)
Higher taxes on motor fuels could raise significant revenue to pay for infrastructure. An increase in these taxes would raise significant revenue that could be dedicated to infrastructure. It is estimated that increasing federal fuel taxes by a penny would raise between $1.5 and $1.7 billion in revenue per year for the Highway Trust Fund (see here). The U.S. Chamber of Commerce estimates that its plan would raise $394 billion over the next 10 years by increasing fuel taxes 5 cents a year for a total of 25 cents over the next 5 years. The Chamber also proposes indexing the tax for inflation and for future increases in fuel economy. While managing higher taxes could be more difficult for lower-income or rural households, other adjustments to the tax code could offset that burden. (For example, see here for a proposal to reduce payroll taxes to offset the effect of carbon taxes on lower-income households.)
Beyond meeting infrastructure needs, a sound economic case can be made for raising taxes on gasoline. The use of motor fuels creates negative externalities – costs imposed on others that are not reflected in the pump price. These negative externalities include both environmental costs of pollution, that contribute to adverse-health outcomes and climate change, as well as congested roadways. Raising these taxes would bring the cost of a gallon of fuel at the pump into better alignment with the true costs of using a gallon of gasoline and inform consumer choices. Facing higher fuel prices, consumers might choose to drive less; they might purchase smaller or more energy-efficient cars; or favor carpooling and public transportation more often, for instance (see here for an economic case for raising fuel taxes as a way to deal with externalities.) Calculating the dollar cost of car externalities is difficult. A 2007 article that reviewed the economic research on the topic estimated that a tax of over $2 per gallon would be needed to cover the costs imposed on others from driving (including costs due to congestion and increased accidents, in addition to pollution). While economists’ estimates of the external costs generated by gasoline are imprecise, Greg Mankiw, a prominent economist who served in the George W. Bush Administration, has suggested that federal gas taxes should be $1 per gallon to cover the negative externalities. Though well above the current rate, that federal rate (combined with state taxes on gasoline) would still be well below that in many other countries.
A gas tax is a step towards a broader tax on all sources of carbon, a policy advocated by many economists, including conservatives. Economists who have served in senior positions in past Republican Administrations have called for a carbon tax coupled with a rebate of these revenues. Such an ambitious proposal seems unlikely to be realized in the current policy environment. The gas tax, with its revenues going to address the widely acknowledged problem of inadequate infrastructure, could well be a more realistic policy goal.
What this Means:
Additional infrastructure spending, if well targeted, likely could boost economic growth and improve Americans’ quality of life. If the U.S. is serious about closing its infrastructure gap, dedicated additional resources will be needed. Higher federal taxes on motor fuels could contribute importantly to that goal. In addition, those higher taxes would help to bring the pump price of motor fuels into better alignment with the total costs, including pollution and related climate change, as well as congestion. Higher gasoline taxes may well be an idea whose time has come.
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by Dan Sichel
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So you want to raise gas taxes on the poor and underprivileged, since wealthy people like yourself could absorb a 25 cent a gallon easily? Why not a 10% excise tax on ALL phone bills...across the board on businesses and ordinary citizen alike.
an unintended consequence of a motor fuels tax increase , is in the case of commercial trucks , the fuel price costs are always passed on to the consumer , if revenues have decreased , that is because of the demand of more fuel efficient vehicles, even Comm vehicles, the less fuel they burn , the less they have to purchase,the less that is taxed.
currently , the bulk of fuel taxes are paid by commercial entities, at the higher rate of taxation because most use diesel fuel, add into that they also have to pay taxes on the number of miles they actually drive in any given state, well it adds up.
And a final point , currently there is a driver shortage in the trucking industry, the rate of turnover is astronomical, some brought on by government regulations , some because , truck driving , isn't all that some seem to think its cracked up to be, so getting qualified drivers to fill those seats left empty isn't easy , so an independent operator , the person that owns their own truck, has to look at those taxes, and figure in how to compensate so that it doesn't come out of their pocket , that leaves the consumer in the end .
As a mind-reader, you're a spectacular failure. So... if you'd like to know my thoughts on this topic (as opposed to the content of the seed) you'd probably do better to ask.
You publicly cast doubt on my military service. You were wrong, both factually and ethically. You owe me an equally public apology. Unless and until you give me that apology, you are not welcome on my seeds.
You publicly cast doubt on my military service. You were wrong, both factually and ethically. You owe me an equally public apology. Unless and until you give me that apology, you are not welcome on my seeds.
so much for keeping that private , as you stated in your PM huh Bob? And for the record ,I don't see it the way you do.
and to repeat what I replied in that PM , you are free to your opinion and belief of your honor being impuned, but there will be NO apology forthcoming, and you do not have the AUTHORITY to demand someone stay off your seeds as you have amply been told, as you can see I didn't reply to you , I replied to Greg , to expand on what he already posited.
Personally I don't care if I am welcome or not on anything you seed, if you don't like that , may I suggest a barbwire wrapped baseball bat , the orifice in your 3rd point of contact with the ground, and to employ vigour and enthusiasm.
I will assume I don't need to explain that.
AND that's about the politest way I know to say THAT....
I PMed you to give you an opportunity to resolve this out of the spotlight. You chose to refuse.
You insulted me, and now you are insisting. Bravo.
Quite right: I cannot prevent you from posting to my seeds. Rather like no one can prevent boorish behavior in a restaurant.
You are not welcome here, but a boor may go anywhere.
Just like an ass can act an ass even after its been pointed out to them. numerous times
So your insulted , no constitutional protections from that "friend".
so how to solve this? a duel at 10 paces at dawn? with supersoakers?
or how about YOU acknowledge your obstrutification that a civilian AR 15 is not repeat NOT the same as a military issue M-16? or will you continue to be a disingenuous ass about the differences? because you had no problem using your military expertise to say that there actually is no disconcernable difference between the 2, when there is. and everyone knows it.
and thank you for making this now part of your seed, way to derail your own stuff.
Oh , as an after thought , from now on , if you decide you wish to post you unwelcome message , I will either respond with a go screw yourself, or go pound dry sand up your....or I just may ignore it all together , that would be a simple thing of mind over matter , I wont mind because YOU don't matter, you figure out which I am likely to do ..
You insulted me. You owe me an apology. Simple.
Or you could just stop evading and simply answer the question.
Why should I give a pass to people who insulted me? All they have to do is say they were wrong, and they regret.
By refusing to apologize, they are, in effect, saying "Yeah, I insulted you. I said you are a liar and a usurper. And now... I'm telling you that I don't give a shit what that means. I won't ever admit I was wrong, regardless."
And you think it's up to me to say "Enough!"?
Seriously?
Ain't gonna happen.
Bob,
Knock this off already. No one "owes" anyone an apology. If I waited every time my 23 year olds insulated me for an apology, I would be waiting till I was dust.
Now stop this now. I am not going to ask you again. Next time you will get a suspension. You are METAing all over the place and it is not acceptable. That is a rule, not a request.
I told you I would not back off.
You should be telling the people who are wrong to back off.
I am not metaing all over the place. I am reacting to intimate personal aggression, and only on my seeds. As I have said, over and over, if my aggressors do not want to apologize, they can still put an end to it all by simply staying away from my seeds. They are posting on my seeds with the purpose of bringing you to suspend me.
By insisting on posting on my seeds, they are in effect saying "Yes, I insulted you, but nobody gives a shit about such things on NT. If we persist, Perrie will go with the pack, as always."
So... Go ahead and suspend the aggrieved party. Nothing new there...
well in the spirit of being forthcoming , and before you ask ME if I have ever been in a combat situation .
I volunteered to enter the military mar 15 1982 , and departed for basic in April of the same year, went through basic and tech school (military police, security side ,USAF) as well as basic ABGD , m-60 specialist school , both @ Camp Bullis texas,
In 1983 I got to spend a leisurely vacation(TDY ) on a lovely little island called grenada securing the air port for a few weeks , some shots were fired in my direction .
84-85 I was stationed with USAFE in Belgium uneventful really except I had to go to GLCM school , a combination of ABGD and ranger school to guard cruise missles in the field .
late 86, I was in the REAL big sand box @ King Khalid military complex with Saudis Awacs providing security on the plane patch for them.
1989 I got to see the pacific ocean in panama, providing security to the canal with some army troops, some shots fired in our direction then as well.
1991 sent BACK to the big sand box for the fun and games of desert shield , when it turned into the storm I got to go into Kuwait as part of an army group because of some training I picked up for the emergency services team back Conus, and yes , there was some gunfire in Kuwait.
By Jun of 1992 I decided to get out of the service ( I was after all getting a little long in the tooth even at 30 and admin jobs do not appeal to me) so I got out Honorably. a copy of my discharge cert is in my pictures , (certain info is redacted for privacy).
Bob,
They are posting on a seed in a public forum. You are posting your seeds in a public forum. If you can't get past your grievances than maybe this isn't the place for you to be.
View this anyway you like. I am done with this nonsense.
I say we stop spending 600 billion on military. Problem solved.
That will never happen...at least as long as there is Republican control of the government.
well if we do stop spending that , we will have to close a lot of bases overseas, meaning , the countries those bases are in will have to pick up more of the cost of their own national security, money they have used for that progressive medicine everyone touts , their education systems will loose some funding because the money has to be spent elsewhere, and that's not even mentioning the money lost locally if or when the bases leave , all those GI bucks go with the personel.
You are not welcome here.
It makes sense to me that the cost of infra-structure should be paid for by those who use it.
But not necessarily in total-- perhaps a good solution would be to put a tax on gasoline that pays for infrastructre in part-- and have the government fund it in part.
IIRC, infrastructure was an issue that both Trump and Hillary agreed on-- that is that is important and that we should do it. In fact t should be a high priority. (I agree).priority.
But I have a feeling it might not pass. Why? Because it seems to me that at this point Republicans won't vote for spending more money. (Unless, of course, it dis[proportionately benefits their state or district).
Especially now that Trump's tax plan will greatly increase the deficit.
This is not so simple. Why are people using roads? A lot of them are commuting. So their using the road benefits their employer.
The same reasoning applies to public schools, whose product is to the advantage of all of society.
The idea that rich people shouldn't have to pay for public schools because their kids go to private schools is.. vile. The idea that rich people shouldn't have to pay for roads because they travel by private jet is just as vile.
Carefully read the article bob nelson.
On the whole I agree with every premise.
However, in my opinion, raising the taxes are neither necessary or a fair response in addressing America's infrastructure and rebuilding issues.
There is more than enough money to address this issue and more. Unfortunately, because of Supply Side Economics the wealth is concentrated into the control of a small elite class that has become too burdensome and expensive for the rest of America to support.
The American Super Class claims it can not afford a $15 dollar an hour wage but has little problem with the members of 'this class' garnering annual incomes of $75 to $500 Million a year with some individuals in the Billion Dollar range, many of whom sequester their assets in untouchable/untaxable offshore accounts.
Fifteen to twenty dollars and hour is too much? Five Hundred Million Dollars is not enough?
There is plenty of money. Unfortunately, too much of it is in the category of lazy, unaccountable, unpatriotic wealth.
Yay!!
If we eliminated all subsidies to Big Oil, gas would cost about ten dollars. That's politically unreasonable, instantaneously. But over ten years, it's doable. (In France, I pay about eight dollars already.) The consequences would be... excellent.
Big Oil shareholders would either hold onto their shares and lose a ton, or bail out.
The relative value of renewable energy would skyrocket.
Win-win.
Just a thought if I may Bob , that's predicating those investors that bail to save from loosing when petrol tanks would reinvest in renewable tech , likelihood of that reinvestment? not really good from what I have researched. But I haven't been an investor in almost 8 years now , and don't plan on becoming one during this administration either.
Bravo. However, In France where you pay eight dollars already, you also have pension and if you break your leg it does not cost $50,000. I know, two years ago I fell on the ice--compound fracture in hand and wrist----surgery, one day in hospital----total bill $53,000. I had insurance--my out of pocket was a little over $1,000.
Eliminate subsidies to big OIL the gas would cost $10 a gallon. Probably so if BIG OIL continued to maintain its multi-billion dollar profits and multi-million dollar salaries for the upper echelons and the multi-million dollar retirement packages for those upper echelon folk, not to mention the maintenance and cost of the fleets of private jets.
You see, it is honorable and patriotic for someone to lose their limbs or lives in the defense of our nation. But.........that same mindset does not exist for those who benefit from the wealth this nation can provide. Too many are willing to take but unwilling to give back. Sacrifice is only for the lower income scale I suppose.
Solar is the future. Forward thinking economies are already moving on this. China, Japan, Europe and Saudi Arabia. And others too of course.
In America...............well, some say Coal is coming back. There it is. There you have it.
Off topic. As an aside. I have a feeling that MAGA has ran its course. Not much left except the screaming, pointing and accusations.
You are not welcome here.
You're right that it's hard to accomplish one reform in isolation.
That's why I usually talk about "ten years" for accomplishing things.
Until you get your self under check your articles are not welcomed here. Article closed.