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Higher Gas-Tax Idea Joins Fiscal-Cliff Talks

November 29, 2012
Josh Mitchell
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States and business advocates are maneuvering to use the current budget negotiations in Washington to win support for a long-sought increase in the federal gasoline tax—one of a grab bag of proposals various groups are seeking to tuck into a deal.

The White House and Congress are trying to craft a broad deficit-reduction deal to substitute for the so-called fiscal cliff, a $500 billion combination of tax increases and spending cuts set to begin Jan. 2. State highway officials and industries that stand to benefit from increased highway spending—including road builders and heavy-equipment makers—are among those pressing lawmakers to raise the 18.4-cent-a-gallon federal gasoline tax as part of an agreement.

Other industries also are moving to have initiatives attached to a budget deal—as part of either a short-term agreement this year or a longer-term plan reached next year to overhaul spending and taxes. Casinos are pushing a measure to legalize Internet poker games nationally. Small banks are pressing to extend a program that gives unlimited federal guarantees to certain bank deposits. Governors want additional aid to cover destruction wrought by Hurricane Sandy. The financial industry is pushing to loosen regulations on complex financial derivatives.

“Basically, you’ve got a bunch of people waiting in the wings to stick the collection plate out and grab whatever they can grab,” said Dan Kish, senior vice president for policy at the Institute for Energy Research, which advocates for free-market energy policies. The group, which receives funding from the oil industry and other energy producers, has criticized efforts to get a tax on carbon emissions included in a budget deal.

So far, it isn’t clear which, if any, proposals are gaining traction, or whether a broader deal will be reached, given disagreement between the White House and lawmakers over taxes and spending.

The federal gas tax was last raised in 1993 and 1990, each time as part of a deficit-reduction plan. After failing for years to overcome public opposition, supporters of another increase see the current talks as a once-in-a-generation chance to raise the tax, which finances highway and transit construction.

The U.S. government spends roughly $52 billion a year on highway and transit projects, but the gasoline tax is generating only about $37 billion annually. That has created a roughly $15 billion annual shortfall that Congress has filled in recent years by taking money from the government’s general fund, adding to the budget deficit. Transportation experts say that without a permanent fix, the shortfall will widen with declines in gasoline consumption as Americans drive more fuel-efficient autos and use other means of transportation.

“Anybody in the transportation community’s been talking about a need to raise the fuel tax for many years now,” said Bill Graves, head of the American Trucking Associations, which represents truckers. “No one [in Congress] wants to publicly acknowledge it, no one wants to publicly go there. But privately they all they get it.”

The gas-tax revenue is distributed to states to finance transportation projects, such as repaving highways and building new subway stations. Business groups supporting an increase say these projects create jobs, reduce traffic congestion and speed the transport of workers and goods, helping the economy.

The 2010 Simpson-Bowles deficit-reduction commission proposed raising the gas tax as part of a broad deficit-reduction plan.

President Barack Obama has opposed raising the gas tax. The White House didn’t respond to requests for comment. Representatives of House Speaker John Boehner (R., Ohio) and Senate Majority Leader Harry Reid (D., Nev.) didn’t respond to requests for comment.

The Association of State Highway and Transportation Officials has floated the idea of replacing the 18.4-cent tax with one that charges oil companies a percentage of their gasoline sales. Under that plan, tax revenue would increase along with the price of gasoline. The state group also is pitching a proposal that would include automatic increases in the gas tax linked to the rate of inflation.

A spokesman for the American Petroleum Institute, representing the petroleum and natural-gas industries, said the group wouldn’t take a stance on a proposal without seeing the details, but he pointed out that raising the gasoline tax would hurt many families who are already struggling financially.

—Alan Zibel and Jamila Trindle contributed to this article

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