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Trump Floats Idea of Raising Federal Gas Tax

Monday, May 8, 2017

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President Donald J. Trump said last week that he was considering raising the federal tax on gasoline, and using the new revenue for his infrastructure package.

If Trump raises the gas tax, it would be a potentially major policy change, and could cause a rift with Congressional Republicans, many of whom have historically opposed raising the tax.

President Trump in a truck
White House

President Trump said last week that he wouldn't rule out raising the gas tax, something he said figures in the trucking industry support as a way to fund infrastructure improvements.

Trump agreed in an interview with Bloomberg News that he would consider increasing the federal gas tax if he had a dedicated revenue stream for his infrastructure plan.

“I have one friend who’s a big trucker and he said, 'I’ve never seen anything like it,' you know, with the roads," Trump said in the interview. "And his trucks are all being destroyed, and he’s going to start buying cheap equipment now. Yeah, the roads are in bad shape."

He added that that truckers had told him that "they would not mind a tax—you know, gas tax or some form of tax.”

The Congressional Budget Office reported that the federal gasoline tax raised $20.6 billion for the highway trust fund in 2015; the diesel tax raised an additional $8.5 billion.

Dissecting the Plan

Trump’s $1 trillion infrastructure plan would finance work on roads, bridges, airports, schools, housing and broadband access, among other items.

A budget proposal Trump put forth in March would have the federal government take a step back in funding its transportation projects, leading some curious as to how the administration would achieve the $1 trillion infrastructure plan it touted during his campaign.

Trump’s so-called “skinny budget” involves a $2.4 billion, or 13 percent, cut to discretionary spending at the Department of Transportation, which administration officials have said would be remedied when the president's infrastructure bill, a separate piece of legislation, is unveiled this summer.

"The Democrats want infrastructure, they want a trillion-dollar bill, and I’m totally open to that,” Trump said. “We are in agreement there."

Tax History

The federal gasoline tax, which was signed into law by President Herbert Hoover in 1932, is 18.4 cents per gallon (24.4 cents per gallon for diesel), and it was last increased in 1993 during the Clinton administration.

Since 1993, revenue from fuel taxes has dropped because of inflation. Meanwhile, the average fuel economy of a passenger vehicle increased by 12 percent, according to the U.S. Department of Transportation, meaning many drivers are spending less on gas and paying less tax at the pump.

Gas pump
© iStock.com/aydinmutlu

The federal gasoline tax is 18.4 cents per gallon (24.4 cents per gallon for diesel), and it was last increased in 1993 during the Clinton administration.

States charge their own gasoline taxes, on top of the federal tax. Pennsylvania has the highest gas tax in the nation (52.8 cents per gallon). Alaska (12.25 cents) boasts the lowest.

Obama’s Plan

The previous administration opposed raising the gas tax, but late in his presidency, President Barack Obama proposed a new $10 fee on every barrel of oil, which would have gone toward transportation research and infrastructure investments. The $10-per-barrel fee would have first been covered by oil companies, which likely would have passed on the increase to drivers.

Critics said that would be equivalent to an increase in the gasoline tax, but the point was moot: The fee was not approved by Congress.

During the Obama administration, Democrats focused on offsetting costs by limiting oil and gas company tax breaks, which likely would not get much support from the Trump administration.

Slicing the Tax Rate

Trump’s tax plan, released on April 26, would cut the maximum corporate tax rate to 15 percent from the current 35 percent. That reduced rate would also apply to partnerships and “pass-through” private businesses. The one-page plan did not mention a federal gas tax.

The president told Bloomberg he was willing to surrender parts of the tax plan in negotiations with Congress. He refused to specify which items he would reconsider.

   

Tagged categories: Department of Transportation (DOT); Funding; Government; Infrastructure; North America; President Obama; President Trump; Program/Project Management; Taxes

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