While it is no secret that the current average price per gallon of gasoline is at record-high levels, it still remains, in a sense, a secret as to why the United States gasoline tax has not been raised once going back to 1994. Yes, 1994.
Specifically, the federal gasoline tax has not increased from its current levels of 23.4 cents for diesel and 18.4 cents per gallon of gasoline since 1994. So, we are going on nearly 30 years without a single increase, not even one, across both Democrat and Republican White Houses, too.
What’s more, as LM has reported myriad times in the past, by most accounts, the common refrain for not raising the tax over this duration appears to be “a lack of political will.” That is really saying, especially when considering that the gasoline tax serves as the key funding mechanism for the Highway Trust Fund. And don’t forget that the Highway Trust Fund routinely pays out more than it collects, continuing to make the case for the tax to be raised, or so it would seem.
Here is another thing not to forget: having sufficient capital in the HTF is critical as its revenues are allocated for federal highway, transit, and highway safety programs. What’s more, diesel taxes represent about 90 percent of Highway Trust Fund (HTF) net revenues.
OK, so enough about the longstanding issues related to the lack of an increase in the gasoline tax. The reason for that, again, goes back to the current situation, with gas prices stubbornly remaining at all-time highs. That is a problem for consumers and businesses alike, no question.
Now, there is talk about President Biden “considering a gas tax holiday to ease high fuel prices,” according to a New York Times report published this week. Were this to come to fruition, it would require Congressional approval. Given the current political climate, it could well be viewed as a longshot, to be fair.
What’s more, the report observed that the “White House and congressional Democrats have discussed a national gas tax holiday (through the end of September) as one of the few options for bringing down the cost at the pump, as external factors have been major drivers of surging prices.”
And it also noted, as has LM, that in late March President Biden announced a plan to produce one million additional barrels, from the nation’s Strategic Petroleum Reserve (SPR), on average—every day—for the next six months.
This did not come as a surprise, given the significant run-up in gas and oil prices since the beginning of the Russia-Ukraine conflict, with freight transportation and supply chain stakeholders, as well as consumers, feeling tremendous pain at the pump.
What’s more, in his February State of the Union address, President Biden said that the U.S. is working with 30 other countries to release 60 million barrels of oil from reserves around the world, with the U.S. leading that effort and releasing 30 million barrels from its own Strategic Petroleum Reserve, and is prepared “to do more, if necessary, unified with our allies.”
The current pain at the pump is equal parts real and unprecedented, in that it is directly affecting how consumers spend and get around, as well as how companies do business. That is not to say that there are fewer trucks on the road, not at all. There will always be trucks, but, given the meager miles per gallon they get, it is making a difficult situation that much worse, no question.
While President Biden seems to have good intentions, it remains to be seen if his efforts towards suspending the national gas tax do actually occur. But, at the same time, there is also the question of what happens next, should prices go down, in that would the tax come back at the same levels they have been since 1994, or would it come back at a higher rate that is needed to make the Highway Trust Fund solvent? It is a thorny and likely combative issue to be sure.