Gas prices are plunging, and the Highway Trust Fund is broke. After more than 20 years, why won't Congress just raise the fuel tax?
By Russell Berman, December 7, 2014
A man changes the price of gas this week in Medford, Massachusetts.
In theory, advocates of an infusion of spending to fix the nation's
crumbling roads and bridges have found the perfect political moment.
Fuel prices are plunging to their lowest level in years. The Highway
Trust Fund is broke, and Congress faces a spring deadline to replenish
it. The obvious answer—the only answer, according to many in
Washington—is to raise the 18.4 cent-per-gallon gas tax, which hasn't
gone up in more than 20 years. Since prices at the pump have dropped
more than a dollar per gallon in some areas, drivers would barely notice
the extra nickel they'd be forced initially to pay as a result of the
tax hike. That wasn't true until recently: For years, the pocketbook
punch of the Great Recession combined with gas prices that peaked above
$4 made an increase both politically and economically untenable.
Yet even with prices at a four-year low, the odds of Congress
touching the gas tax are as long as ever. "I think it’s too toxic and
continues to be too toxic," said Steve LaTourette, the former Republican
congressman best known for his close friendship with his fellow Ohioan,
Speaker John Boehner. "I see no political will to get this done."
Taxes on gasoline and diesel fuel have financed the Highway Trust
Fund since its inception under President Eisenhower in 1956. Congress
periodically raised the levies for decades with bipartisan support, but
it has not done so since 1993, when an increase was included as part of
President Clinton's economic plan, which passed both the House and
Senate by just a single vote. Neither George W. Bush nor Barack Obama
have supported increases in the gas tax. In 2008, the trust fund became
insolvent and has since been plugged by transfers from the Treasury.
Advocates on and off Capitol Hill are mounting a new push to lift the
gas tax as Republicans prepare to assume full control of Congress in
January. Funding for the Highway Trust Fund will run out May 31. On 60 Minutes last month,
officials including former Transportation Secretary Ray LaHood and
former Pennsylvania Governor Ed Rendell used the specter of a major
bridge or highway collapse to warn of the need for new investments.
LaHood, a Republican who was once rebuked by the Obama White House for
suggesting a switch to a mileage-based tax, is now going public on the
gas tax, in his typically colorful style. "The best argument for doing
it is is that America is one big pothole," he told me in a phone
interview, "and America’s infrastructure is in the worst shape that
we’ve seen in decades."
At the Capitol, Representatives Earl Blumenauer, an Oregon Democrat,
and Tom Petri, a Wisconsin Republican, summoned a different image to
make their case: Ronald Reagan. Standing next to a cardboard cutout of
the conservative icon, the congressmen pointed to the gas-tax hike
Reagan signed in 1982 as an example of a time when Republicans and
Democrats joined to support infrastructure. They propose increasing the
tax by 15 cents over three years and then indexing it to inflation. so
that Congress would not have to keep returning to the issue every few
years. "That would solve the funding problem," Petri said by phone after
took a more optimistic view than LaTourette of the politics of raising
the gas tax, arguing that the sustained drop in fuel prices would change
the minds of his more conservative colleagues, particularly if they reach $2 a gallon in more and more areas.
"I don’t think there’s any question that it’s going to change the
dynamics and make it much more palatable," he said. But he warned of a
lag between the politics and the market. "It sometimes takes a little
while for institutions to adjust to changes in the real world. So it may
not happen instantly."
While Petri gives the gas-tax proposal a bipartisan imprimatur, his
support shouldn't be mistaken for a major act of political courage.
After 36 years in the House, Petri is retiring from Congress in a few
weeks, forcing Blumenauer to start anew in January. While he backed the
tax increase under Reagan in 1982, he said he only recently endorsed
Blumenauer's legislation. Both lawmakers have also blamed the Obama
administration for opposing any increase in the tax, a move they said
discouraged lawmakers in both parties from publicly embracing it.
"Republicans have tended to shy away from sticking their head up too
far, because the feeling was, you do it and then the president cuts you
off at the knees," Petri said.
In a separate interview, Blumenauer said the administration had
recently "dialed back" its opposition, with senior officials telling
lawmakers that if Congress could somehow pass a gas tax hike, he would
sign it. Yet just a few hours after his and Petri's press conference,
Obama himself seemed to put their plan back on ice. At a business
roundtable at the White House, FedEx CEO Frederick Smith asked Obama why
Congress couldn't just raise the gas tax and solve the infrastructure
problem. "In fairness to members of Congress, votes on the gas tax are
really tough," the president replied, after first chuckling that if it
he were in charge on Capitol Hill, "I probably already would have done
He said he'd work with Republican leaders on a short-term plan to
refill the trust fund but for the long term, Congress probably needed to
turn away from the gas tax and find another "dedicated revenue source
for funding the infrastructure that we need that is not so politically
frightening to members of Congress that it’s reliable." A report earlier this year from the left-leaning Center for American Progress
suggested shifting from a tax on fuel to a fee tied to mileage, but
it's not clear that idea would garner any more political support than
the gas tax.
"The gas tax hasn’t been increased for 20 years. There’s a reason for
that," Obama said. Told of the president's remarks, Blumenauer—a man
known for biking around Washington in a bow tie—practically jumped
through the phone in frustration. "That is creating a self-fulfilling
prophecy!" he snapped. He and other advocates argue that the political
impossibility of raising the gas tax has long been overstated. The issue
already has an impressive array of outside backers, including labor
unions and environmentalists as well as erstwhile GOP backers like the
U.S. Chamber of Commerce. Blumenauer also pointed to public support for
fuel-tax increases at the state level, including in places like Wyoming
and New Hampshire that have historically been hostile to higher taxes.
"It's just not true that it's too politically difficult," he said.
The most politically promising alternative to raising the gas tax
would use revenue from repatriated corporate profits to fund
infrastructure projects. Multinational companies are estimated to be
keeping $2 trillion in overseas accounts to avoid the high corporate tax
rate in the U.S., and repatriation would offer them a tax break in
exchange for bringing the money home and investing it domestically in
infrastructure bonds. Obama has suggested linking a broader corporate
tax overhaul with new infrastructure spending, and the repatriation idea
was included in a proposal from the chief House Republican tax-writer,
Dave Camp, last year. But unlike a tax rate indexed to inflation, that
plan would only cover the Highway Trust Fund for a few years. A
permanent change to the gas tax, LaTourette said, is "the only way
you’re going to sustain [the fund] into the future."
As for the Republicans who will be taking power in January, at least
one in the Senate, Bob Corker of Tennessee, supports increasing the fuel
tax. In the House, however, the new chairman of the Ways and Means
Committee—which has jurisdiction over taxes—is Paul Ryan, the venerated
conservative policymaker and 2012 GOP vice-presidential nominee. Ryan
wants tax reform but has never advocated for a hike in the gas tax, and a
spokesman wouldn't comment on his position. Asked whether he had any
hope that Ryan would come around, Petri harkened back once again to
1982: "Well, he's expressed admiration for Ronald Reagan in the past."
To supporters of the gas tax and the nation's longterm commitment to
infrastructure, the dim hopes for change, even in the face of low fuel
prices, are baffling but not surprising. It's just one more frustrating
example of a political culture paralyzed by fear of the voters' wrath,
whether imagined or real. LaTourette said he had dinner recently with
several former colleagues who are still in Congress and asked them
whether an increase in the tax stood any new chance. "They said no," he
recalled. "There just aren't the votes."