Republicans are weighing whether to raise the federal gas tax. It's an idea they are prone to hate, but they may need it to pay for President Trump’s infrastructure investment plan.
Supporters of the idea note that the tax hasn’t been raised since 1993 and have plenty of evidence that resistance to a hike is wearing down.
The U.S. Chamber of Commerce recently called for the Trump administration and Congress to raise the gas tax by 25 cents per gallon to help pay for an infrastructure package, projecting it would generate more than $375 billion over a decade. For 25 years, the federal tax on gasoline has held steady at 18.4 cents per gallon and 24.4 cents per gallon for diesel. It is not indexed to inflation.
The Republican chairman of the House Transportation and Infrastructure Committee, Rep. Bill Shuster of Pennsylvania, prodded colleagues at the recent GOP retreat to consider setting aside years of opposition and raise the tax.
And perhaps most revealing, some of the most conservative House members who heard Shuster’s pitch are open to it.
That includes Rep. Thomas Massie, R-Ky., an independent-minded conservative who drives an electric-powered Tesla, detests government waste, and is always liable to surprise.
“The gas tax is a pact with the public, if spent properly, that says when you buy gasoline, we charge you money and spend all of it on the roads and bridges you are driving,” Massie, a member of the Transportation and Infrastructure Committee, told the Washington Examiner. “It's more palatable to constituents. People are upset about the wasteful government spending they see in Washington, D.C. But generally, they are not upset about money spent on infrastructure. So, you have to consider those two things differently.”
But Massie and others acknowledge the risk for Republicans that comes with voting for a tax increase, especially after the party recently enacted legislation that reduces taxes for businesses and individuals.
“I would need a lot of guarantees about how the money is going to be spent before [voting] for a gas tax increase,” Massie said. “There is no way I would say I am openly for a gas tax increase. I am not saying never. I am not drawing a red line.”
An infrastructure plan, without a pay-for
The Trump administration is expected to introduce a plan soon to revitalize the nation’s roads, bridges, highways, and other infrastructure. Administration officials have proposed providing $200 billion in federal money to spur at least $1.3 trillion in spending from state and local governments and private industry.
But the Trump administration has provided little insight into how it would pay for the plan or when the proposal is actually coming.
White House officials have said that the $200 billion in federal funding could come from cutting existing infrastructure spending in areas such as public transit and Amtrak. Yet, transportation advocates are seeking a more sustainable revenue source.
The federal government does not have a long-term funding source for transportation and has been resistant to increasing user fees such as the gas tax.
The combination of a gas tax that hasn't changed in 25 years and the greater fuel efficiency of cars has led to chronic shortfalls of more than $70 billion since 2008 in funding for the Highway Trust Fund, the main vehicle to spread money to states to help pay for transportation projects.
The fund is largely financed by the federal gas tax. Congress in recent years has covered the shortfalls with general funds from the Treasury Department.
But the Congressional Budget Office expects the trust fund to face another $5 billion shortfall in 2021, and a $138 billion deficit in 2027, assuming the gas tax stays the same.
The American Society of Civil Engineers estimates the country needs to increase infrastructure spending by $2 trillion to be globally competitive.
“There is recognition on a bipartisan basis that our infrastructure system is at a breaking point,” said Ed Mortimer, executive director of transportation at the Chamber of Commerce.
“It was great to get tax reform done because it provided companies more money to invest in their business. But if we don’t have 21st century infrastructure, we are missing an opportunity for long-term economic growth. The time is right to have a major conversation about this.”
Since 2013, more than 25 states, including right-leaning ones such as Wyoming and Georgia, have raised their gas taxes due to federal inaction.
“Not one politician has been thrown out of office for voting to increase the gas tax,” said Ray LaHood, who was a transportation secretary in the Obama administration. “That’s because, frankly, people are tired of potholes, and they also know when you are investing in transportation, you are investing in workers. The country is salivating for a big, well-funded infrastructure program.”
The Trump administration has sent mixed signals about increasing the gas tax. Last year, President Trump floated 50 cents per gallon raise to lawmakers, according to the Washington Post.
A White House official told the Washington Examiner that it would not rule out a gas tax increase, but said the administration will let Congress debate how to best pay for infrastructure.
“I wouldn’t expect the administration to be that specific in regard to gas tax,” the White House official said. “We are relatively agnostic as to how revenue is produced. We especially aren’t going to take anything off of the table before our plan is released and official negotiations begin.”
Republican pushback from rural lawmakers
Some important Republicans are already ruling out a gas tax increase, and others are hedging on previous supportive statements.
"I'm not for raising the gas tax," Senate Majority Whip John Cornyn of Texas said last month at a private retreat hosted by Charles and David Koch, the billionaire oil and gas investors and conservative donors. "It's going to be a declining source of revenue,” he added, hinting at the likely rise of electric cars. His remarks were reported by CNBC.
Shuster, meanwhile, after vouching for a gas tax increase at the GOP retreat, was less committal in a more recent statement to the Washington Examiner.
“For Congress to pass an infrastructure bill, it has to be bipartisan, and it has to be fiscally responsible, and every option for addressing the Highway Trust Fund revenue shortfall should be on the table for discussion,” Shuster said.
Sen. John Barrasso, R-Wyo., chairman of the Senate Environment and Public Works Committee, told the Washington Examiner he also opposes a gas tax increase.
His committee helped negotiate the most recent major transportation funding bill, known as the Fixing America's Surface Transportation Act, or FAST Act. The five-year bill, signed into law in 2015 by former President Barack Obama, invested $300 billion in the nation’s deteriorating highways, but failed to address the shortfall in the Highway Trust Fund.
Barrasso, like other skeptical Republicans, says not all of the money from the trust fund goes to roads and bridges.
“I’m opposed to raising the federal gas tax,” Barrasso said. “The gas tax isn’t a pure user-fee. Not everyone who uses the roads today pays the tax and not all of the money collected goes towards fixing America’s aging roads and bridges.”
Barrasso is right. Since 1982, 80 percent of the trust fund’s revenues have been dedicated to roads, while 20 percent is for transit, according to the Enos Center for Transportation.
That ratio is not OK to some Republicans representing rural districts who view mass transit as a luxury for urban places.
“I contend as long as it is spent properly, the gas tax is a user fee,” Massie said. “But we should not raise the gas tax to pay for more mass transit, particularly for someone who was just in a train crash,” he added, referring to the recent crash of an Amtrak train carrying Republican lawmakers to their retreat in West Virginia.
Some opponents argue the gas tax is regressive, since it is a fixed fee imposed on everybody who pays it, no matter their income. So, poorer people pay a larger percent of their resources on the tax.
“We are not in favor of a 25-cent gasoline tax to pay for infrastructure spending,” said David Dziok, a spokesman for Koch Industries. “Doing so would weaken the benefits of comprehensive tax reform by forcing Americans to pay more at the pump. Even worse, it’d be a regressive tax that would hit lower-and middle-income families who pay a higher proportion of their income on energy costs.”
Indeed, Republicans are leery of the perception of increasing the gas tax soon after lowering corporate and income taxes.
“To immediately put an increased gas tax on the backs of hardworking Americans, especially when they are now getting a tax benefit, I don't see how we can do that,” said Rep. Tom Reed, R-N.Y., co-chairman of the Problem Solvers Caucus, a bipartisan group of moderates, in an interview with the Washington Examiner.
'Next generation' user fees
Lawmakers and advocates say they could support other ideas for boosting long-term transportation revenue if Congress can’t pass a gas tax increase.
Massie and Reed say one option would be to charge drivers for the amount they drive, in the form of a tax on vehicle miles traveled, or VMT.
California and Oregon have introduced VMT pilot programs, in which motorists can volunteer to pay taxes on the miles they travel and get a rebate on the gas tax they pay.
James Burnley, who served as transportation secretary in the Reagan administration, supports raising the federal gas tax. Reagan led an effort to raise the gas tax in 1982, Burnley reminded the Washington Examiner.
But he says a VMT tax is more “fair” because it would apply to electric and hybrid vehicles.
Massie and Reed fear the gas tax soon will become obsolete as drivers turn away from gasoline and diesel-powered vehicles.
“As new vehicles shift away from gas, we have to recognize the situation and find an alternative revenue source to feed into the infrastructure bank,” Reed said. “We can be creative and develop the next generation of user fees.”
Reed also mentioned a tax on vehicle registration and a carbon tax as potential alternatives.
Mortimer says the Chamber of Commerce has studied the future of the gas tax and believes it will be viable for another 10 years. He said Republicans are right to consider alternative taxes, but they should take immediate action now to raise the gas tax.
“This is probably the only revenue raiser we have supported,” Mortimer said. “This is users paying into the system. This should be a conservative principle. We need some investment now. We can't wait 10 years.”