December 2011

The business case for a gas tax increase gets stronger

by Frank Di Giacomo, Publisher

For years now, politicians, including our current president, have avoided an increase in the federal gasoline tax as a way to pay for needed spending on more transportation projects. Fortunately for him and the country, there is an opportunity this November, and another one before January 2013, to cut a deal on a gas tax increase combined with transportation investment, tax reform and reducing the deficit. He should do so as soon as possible.

You will know by the time you get this whether he tried to get this deal, and whether he got it. By law, the 12-member, bipartisan joint Senate and House deficit commission was to have submitted its plan by November 23, and the Congress is to pass it a month later. There is no roadmap to tell them how to get there except that the committee and Congress needs to get another $1.5 trillion in deficit cuts over the next 10 fiscal years, as scored by the nonpartisan Congressional Budget Office. If they don't, mandatory cuts of $1.2 trillion over the same period kick in, half in domestic programs (including transportation) and half in defense, so they have an incentive to do a deal.

Experts, business groups support tax
Most private business groups, including the U.S. Chamber of Commerce, support a gas tax increase, because they see the dire need for more U.S. transportation investment. So does even the American Trucking Association, whose members would be more directly affected by higher fuel taxes than just about any other industry.

Revenues have always been the sticking point in a six-year authorization bill. The Highway Trust Fund is just too small to support the $400 billion or more of investment that's really needed for economic growth. Even Ronald Reagan saw this connection in 1982, when the Mass Transit Account was created.

The only groups not in favor are most members of Congress, the president and a majority of the public. Yet no one has asked whether they would accept a gas tax hike if it meant greater transportation investment and was combined with other tax re-form. At the state and local levels, voters have approved transportation-related tax increases more than 70% of the time, even during the current recession and in conservative states.

Get it done
In theory, the president and Congress have a little longer than this year to cut this deal. The cuts would kick in as law on Jan. 15, 2012, if the "super committee's" recommendations have not been enacted. The Office of Management and Budget then has until Jan. 2, 2013, when it must issue the cut-spending orders to departments and agencies. Regardless, it's time to do this deal as soon as possible.


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