Feb
18
Trump’s Gas Tax Hike Is a Bad Idea
“I’d hate to see a new tax siphon off 20 percent of the $1,000 tax reform bonuses back to the swamp this year.” — Adam Brandon, President of FreedomWorks
If we needed another reminder that President Trump is, shall we say, inconsistent in his newly-adopted conservatism, we got tariffs imposed on solar panels and washing machines. (This may have some positive results in the short-term, but overall it’s damaging to the economy and free trade.) And then there was the “budget deal”. (Of course, this is as much Congress’ fault as Trump’s, if not more so.) And now… he is pushing for a huge hike in the gasoline tax, in order to help pay for his infrastructure mandate.
The proposal was not part of the administration’s recently-revealed infrastructure plan. As summarized by Erin Coates at The Western Journal,
“The $1.5 trillion dollar infrastructure plan calls for $200 billion [supposedly offset by budget cuts] to be spent by the federal government on infrastructure over the next 10 years. The rest of the money would come through partnerships with state and local governments, as well as private entities. One-quarter of the federal money — $50 billion — will be devoted to rural infrastructure projects. The bulk of that money will be allocated to state governors to direct where it is most needed.”
The gas tax hike idea came out of a subsequent meeting with legislators. OK, maybe the idea didn’t originate with Trump, but he has “promised to provide leadership” in support of it. Of course, several Democrats are all for it, including Obama’s Transportation Secretary Ray LaHood. Fortunately, many conservatives are less than pleased with the idea, and House Speaker Ryan is reportedly “not interested”. On the other hand, some Republicans like House Transportation Chairman Bill Shuster (R-PA) are already on record as being in favor of such a move.
Personally, I like the idea advocated by Phil Kerpen and the American Commitment organization, which is to fund infrastructure improvements out of monies recovered by cutting waste, fraud, and other “abusive” government expenditures. That would seem to be good incentive for finally addressing the government waste/fraud/abuse issue, which Trump has already begun doing in some areas. But, raising gas taxes is probably just easier to implement and a more assured method of obtaining a measurable amount.
As per a Politico article,
“[T]he A 25-cent hike [per gallon of gasoline and diesel] phased in over five years would generate an additional $375 billion over the next 10 years, according to the U.S. Chamber of Commerce, which backs the idea….
Raising the gas tax would only go so far by itself, because Highway Trust Fund money cannot go to waterways, broadband service, airports, veterans hospitals or any of the other broad array of project types that Trump’s infrastructure plan seeks to fund. But it could achieve more than many infrastructure supporters had expected of Trump’s plan — offering a sustainable funding source instead of a short-term shot in the arm.”
Now, I’m tax-averse to begin with, as I’m sure many of you are. That’s one reason why the recent tax reform legislation, imperfect though it is, has gone over so well with so many. Why would the President want to take part of that money and goodwill away? When one factors in already increasing gasoline prices, it makes even less sense. (See above chart from Strategas Research’s Dan Clifton for potential consumer impact. Also, this.) Rising gas prices never help a president’s approval rating or his party in midterm elections.
Boston traffic (Southeast Expressway looking northbound), by Matt Stone
Stephen Moore, distinguished visiting fellow at The Heritage Foundation, lays out several pertinent facts on the matter:
“Almost everyone agrees that the current financing structure for good roads and highways is flawed and inefficient. But a federal gas tax hike would contradict the goal of the Trump infrastructure plan, which is to rely more heavily on states, localities and private investment to pay for modernizing our roads and bridges.
Yes, there are some local roads that badly need repair, but sending more money to the feds is a guaranteed way to get that money squandered….
[T]raffic gridlock costs the typical American rush-hour commuter an estimated 42 hours of lost time each year. This is nearly the equivalent of a lost week each year.
But this isn’t because of a lack of road funding or a so-called “highway trust fund shortfall.” It is primarily because according to a Heritage Foundation report, at least 25% of fuel tax funding is used for non-highway projects such as mass transit, bike paths and bus service.”
I need to pause here to say that I’m guessing Moore’s “42 hours = nearly a week” is referring to a 40+-hour workweek.
He continues…
“This hijacking of gas tax dollars helps explain why we have so many potholes the size of a beach ball — and why the problem will get worse if the gas tax is raised.
Congress typically raids about $10 billion a year from the highway trust fund to pay for mass transit projects…. Public transit has a minuscule impact on traffic gridlock — except for a few high-density cities like Washington, D.C., New York, Chicago and San Francisco…. [Plus,] in a generation, many experts say that mass transit is going to be as obsolete as the rotary phone, and we will be ripping up the tracks, not laying them down….
The gas tax is also an outdated tax because of huge gains in fuel efficiency and the increased use of electric cars that don’t use gasoline…. Every car will have an EZ pass that will charge drivers for the roads they use and only for the roads they use. Time-consuming toll booths, already on the decline, will be no more. This will allow the private sector to own, operate and maintain our roads with minimal government involvement.
This improved transportation network could add hundreds of billions of dollars to the American GDP. And all this can be done with lower, not higher, gas taxes paid at the pump.”
Are the President and Congress aware of all this? ‘Cuz, if they truly want to do what is best for the American people rather than just build a pile of cash, it sounds like they need to seriously rethink this whole infrastructure plan and in particular the wisdom of raising the consumer taxes on gas and diesel.
P.S. Some of you may find this 2015 article of interest: “Highway Trust Fund Basics: A Primer on Federal Surface Transportation Spending”.
P.P.S. Also, here is a 2015 article from Stephen Moore (“Washington’s gas tax guzzlers”), in which he looks at the hypocrisy of Obama and the Democrats on the subject. He also said, among other things, “Rather than raise the federal gas tax, a better policy would be to repeal the federal tax and let states pay for their own road projects. The interstate highway system was completed 30 years ago and there is no more need for a national tax at 18.4 cents a gallon to fund bridges and high-speed rail projects to nowhere. Devolving transportation projects back to the states will ensure that gas tax money is used for the highest value-added projects.” Makes sense to me.
