Gas Tax Hike or Use Fee?

A current proposal to increase the US fuel tax by as much as 50% could be part of a recommendation from the National Surface Transportation Infrastructure Financing Commission expected later in January 2009.

The 15-member panel is widely reported as calling for an increase in fuel tax—10 cents per gallon for gasoline and 12 cents to 15 cents for diesel.

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The National Surface Transportation Infrastructure Financing Commission was created by Congress to examine future highway and transit needs and the finances of the Highway Trust Fund.

Added to the current 18.4-cent gasoline tax and 24.4-cent diesel tax, the proposed increases could take the tax bite for fuel purchases to 28.4 cents on gasoline and as much as 39.4 cents for diesel fuel. And, reportedly, the Commission is also calling for the tax rate to be tied to inflation, all but guaranteeing continued increases.

Reuters news service quoted Robert Atkinson, president of the Information Technology and Innovation Foundation and chairman of the commission, as saying, "We've basically had a 30-year experiment in this country in under-investing in surface transportation infrastructure."

In addition to the tax increase, the Commission is reported to be supporting aggressive use of tolls and congestion pricing.

Historically, the US transportation system focused on building robust connections between various destination points and within cities, says a statement by the DOT Secretary and commissioners Maria Cino and Rick Geddes. “The question of how to create efficient financing mechanisms for these systems is far less important when the test of success is how much highway or track mileage was added or rehabilitated in a given year,” they said. “Such an approach promotes relative indifference to the revenue mechanisms themselves so long as adequate revenue is generated. This is not a sustainable policy.”

An earlier fuel tax hike proposal was opposed by Department of Transportation Secretary Mary Peters. Then, late in 2008, an emergency bill had to be moved through Congress to prop up the Highway Trust Fund. At that time, increasing fuel costs led to fewer miles being driven. And less driving translated into lower purchases of fuel and less federal tax being collected.

“When it came time to address the rapidly growing Trust Fund solvency issue, Congress chose to do nothing,” Peters argued at the time. “Instead, members continued to earmark, continued to divert transportation dollars to lighthouses and museums, and continued to spend like there was no tomorrow.”

In early September 2008, Secretary Peters claimed that instead of running out of money sometime in 2009, as had been indicated in earlier comments, in fact funding would run out at the end of the month. And at that point, both parties and the Administration moved to pass and sign the needed legislation.

Additional background:

DOT Secretary Opposes Fuel Tax Hike
The Highway Trust Fund Gets an $8 Billion Fix

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