Republicans already gunning for major tax hike
GOP congressmen floating ‘trial balloon’ to see ‘how far they can push the envelope’
Congress is desperately searching for money to replenish the Highway Trust Fund, but National Taxpayers Union President Pete Sepp is urging key Republicans to back away from a hike in the federal gas tax to provide the needed revenue.
In an unusual twist, it is Republicans publicly toying with the idea of higher taxes, while Democrats are mostly opposed to it. Senate Environment and Public Works Committee Chairman James Inhofe, R-Okla., and Finance Committee Chairman Orrin Hatch, R-Utah, say they are open to gas tax increases and further state that Americans shouldn’t view such a move as a tax hike but more like a “user fee.”
The federal gasoline excise tax is 18.4 cents per gallon, while the rate for diesel is 24.4 cents per gallon. The last gas tax increase came as part of the Clinton administration increases in 1993, and it is not indexed to inflation. The notion of raising the federal rate is gaining some traction as a result of plummeting gasoline prices in the U.S. over recent months.
Both Inhofe and Hatch insist all options are on the table to supply money for the Highway Trust Fund, and they are not demanding a tax increase. Sepp said recent reports are probably just testing the public reaction to the idea of higher taxes.
“I think that this is largely, so far, a trial balloon, an attempt by Republican lawmakers to see just how far they may be able to push the tax increase envelope,” Sepp said.
What is behind the parties’ role reversals on this issue? Sepp said Republicans may see the gas tax differently than other rates Americans must pay.
“Perhaps they believe that because the gasoline tax and diesel fuel tax is a levy on the consumption of a good or service, that’s better than doing something like an income tax increase,” he said. “Well, from an economic standpoint, a consumption tax would probably cause less economic damage than an income tax increase. But the damage would still be there.”
Sepp contends that logic is flawed on multiple levels. First, he said officials in Washington warm up to ideas like higher gas taxes based on deeply flawed assumptions, like all of the money will go to the right place.
“The only problem is, throwing more money at some of these projects by the federal government doesn’t necessarily translate into reduced congestion or fewer potholes,” he said. “There are a mound of pork barrel projects that often get funded in highway bills. We also have a severely inefficient distribution of the funding.”
In addition, he said higher gas taxes would definitely be a blow to consumers.
“Although it’s buried in the price of a gallon of gas, it’s still something that many people will feel almost immediately when they fill up at the pump every week,” said Sepp, noting that the financial toll doesn’t end when you leave the gas station.
“If diesel fuel taxes increase, there will be a ripple effect in other kinds of goods and services and their prices. So many of the things that we buy, whether it’s toys or food or pizza delivery for that matter are provided through vehicles that run on gasoline or diesel fuel,” Sepp said.
There’s also the concern about fuel prices rising again. Sepp said the U.S. is enjoying the fruits of an energy revolution, but if Congress decides to raise taxes on oil companies or the Environmental Protection Agency applies additional regulations on energy exploration, prices could reverse course. He said some responsible work by Congress would do a lot of good.
“We can’t necessarily count on good, low energy prices until we get a stable energy policy out of our federal, state and local governments, who recognize the value of good, abundant, affordable energy,” Sepp said.
Syndicated columnist Charles Krauthammer’s latest opinion piece calls for increasing the federal gasoline tax by $1 per gallon but offsetting it with cuts in FICA taxes. He theorizes such a move would provide plenty of transportation funding for the government while taxpayers break even and maybe even save more money if they make conserving fuel a priority.
Sepp said the biggest problem with that idea is Washington’s penchant for going forward with the tax increase while the tax cut somehow gets left on the side of the road. He said there would have to be strict assurances that all parts of the deal would be honored.
But even then Sepp said lawmakers are missing out on better, free-market ways to improve America’s national infrastructure. He endorses tolls on more roads and considers that a more accurate consumption tax than raising the gas tax. Sepp said another simple adjustment that could preserve infrastructure and improve traffic flow would be passing the Safe and Efficient Transportation Act.
“What this would do is allow states to have heavier trucks on their roads, not bigger trucks but heavier trucks, with a fifth axle to distribute the weight and minimize pavement damage. What you do by allowing heavier trucks is you allow more efficient loads to be put on them,” he said. “When that happens, you have fewer trucks on the road. In the end, you get less congestion and less repair needs on many roads around the country.”
And what will happen with the “trial balloon” testing the viability of a gas tax increase? Sepp said that’s up to the taxpayers:
“Hopefully, the American people will push back and say, ‘Look, we want to do something about our infrastructure problems, too. Why don’t you take a look at the spending first, as well as alternatives to taxation?’”