Why It’s Time to Raise the Federal Tax on Gasoline

Twenty-two years ago, when the price of gas at the pump was $1 a gallon and a movie ticket was $4, Congress saw fit to set the gasoline tax at 18.4 cents a gallon. The idea was to ensure enough funds for the Federal Highway Trust Fund to keep our roads and bridges in good repair. Today, while almost all other prices have soared, the gas tax hasn’t budged, and the trust fund is depleted. With world oil prices crashing, we have a unique opportunity to raise the gas tax, replenish the trust fund, leverage private-sector financing and leave the U.S. consumer far better off than just a few weeks ago — all at the same time.

A number of lawmakers and senators from both parties are beginning to explore this idea. The new chairman of the Senate Commerce, Science, and Transportation Committee, Republican John Thune of South Dakota, said on Fox News on Jan. 4 that raising the federal gas tax was among the options to replenish the trust fund. A month earlier, Democratic Rep. Earl Blumenauer of Oregon proposed a 15-cent hike in the gas tax to raise an estimated $170 billion over 10 years.

Back in 1993, the 18.4-cents a gallon tax represented roughly 40 percent of the then-prevailing cost of a gallon of petroleum on world markets. The world price of petroleum has more than tripled since then, so that the unchanged gas tax has declined to around 12 percent of the world petroleum price for a gallon of gas. With highway and mass transit costs rising along with other costs, the federal gas tax no longer provides the trust fund with enough money to address the essential needs of the federal land transport system.
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