Still making the case for raising the gasoline tax…

A report released by the Institute on Taxation and Economic Policy stated that "State lawmakers reluctant to update gas taxes have cost their states, on average, $201 million in annual revenues. These losses are exacerbated by the fact that the federal gas tax, which also supports state transportation projects, has lost 41 percent of its value since it was last raised in 1993."

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As you likely know, the United States is facing serious shortfalls when it comes to transportation infrastructure-related matters.

One reason for this, of course, is political dysfunction, which we know there is clearly an abundance of, and another reason, which is plain as day, has to do with funding. Where is it coming from? What are the drivers for funding? So, in other words, the same questions that have been getting asked through eight continuing resolutions—or extensions—approved by Congress since SAFETEA-LU expired in September 2009.

A major funding source for transportation infrastructure and highway construction is the federal gasoline tax. I know you probably know this, but I will quickly re-state it anyhow: this tax stands at18.4 cents on gasoline, 23.4 cents on diesel and has been unchanged since 1993. 1993? Really? But I digress.

Meanwhile, we continue to hear the same tired excuses as to why it cannot—or simply won’t—be raised. They are things along the lines of what Department of Transportation Secretary Ray LaHood told me at the SMC3 Winter Conference in January:

“The President has indicated on any number of occasions that he is opposed to raising the gas tax in a very, very lousy economy, with unemployment still over 9 percent,” said LaHood. “Many people are hurting, and some cannot even afford to buy a gallon of gas, let alone have the gas tax raised. We are not recommending that, and we are not suggesting that. That is not something the President is for, so we will not be making any proposals to raise the gas tax.”

That response was not surprising then and it remains not surprising now today as well.

In any event, what was somewhat surprising was a report I received today from the Institute on Taxation and Economic Policy (ITEP), which stated that state governments are losing out on more than $10 billion on transportation revenue annually, which is serving as “a $130 billion drain on the economy resulting from higher vehicle repair costs and travel time delays.”

So, what does this have to do with the gasoline tax, you ask?

In short, this (and I again quote ITEP): “State lawmakers reluctant to update gas taxes have cost their states, on average, $201 million in annual revenues. These losses are exacerbated by the fact that the federal gas tax, which also supports state transportation projects, has lost 41 percent of its value since it was last raised in 1993.

Hard numbers to fathom, I know. Instead of raising the gasoline tax, the report points out that lawmakers are more inclined to do other things to compensate for not raising it, including: raising sales taxes, fees on vehicles, and tolls, among other things. Hardly a pretty picture indeed.

What’s more, the report explains that after adjusting for construction cost growth, the average state’s gasoline tax has essentially decreased by 20 percent—or 6.8 cents per gallon—since it was last raised. And at the same time, diesel prices have dropped 18 percent—or sixe cents per gallon.

And it is not as if raising this tax would blow a family’s holiday budget either. According to the report, the current gasoline tax comprises a smaller portion of family budgets than at any time since the tax was first rolled out back in the 1920s, with a ten cent increase in the tax costing an average driver $4.31 per month, with the 6.8 cent per gallon increase in the average state costing the average driver $2.93 per month.

Need more? A January New York Times report said the U.S. Government’s gasoline tax receipts fell 2 percent between fiscal 2007 and fiscal 2010, citing Federal Highway Administration data.

The NYT report also pointed out that the U.S. gasoline tax is “almost laughably low compared with those in Europe,” and “meanwhile inflation and particularly road repair costs have soared.”

And as LM has reported, several carriers, especially in recent years, have been of the opinion that they would be more than willing to pay more in gasoline taxes, provided the funding goes back into the roads.

When do we get the monkey off our back and really start doing something to address what is needed? These are tough times for sure, but we need to explore all options, including the no-brainers…like raising the federal gasoline tax.


About the Author

Jeff Berman, Group News Editor
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman

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