Bipartisan Commission floats raising gasoline tax as one way of reducing national debt

Even though the prospect of raising the federal gasoline tax has been described as a “non-starter” multiple times as a way of increasing revenues for the Highway Trust Fund and other sources of transportation funding, it appears to be back on the table again.

A report issued by President Obama’s bipartisan commission charged with reducing the national deficit, led by Alan K. Simpson, former Republican Senate leader, and Erskine B. Bowles, White House Chief of Staff under President William Clinton, suggested to gradually increase the gas tax by $0.15 to fund transportation spending beginning in 2013.

The report stated that raising the gasoline tax, which has been at 18.4 cents for gasoline and 23.4 cents for diesel and has not been increased since 1993, would “dedicate funds toward fully funding the transportation trust fund and therefore eliminating the need for further general fund bailouts.”

Since SAFETEA-LU, the federal transportation authorization expired in September 2009, it has been kept afloat by a series of continuing resolutions. It is currently being funded at current levels through the end of 2010. But with Congress focused on reducing the deficit, it appears unlikely that a new bill, such as the wide-ranging, six-year, $500 billion one proposed by outgoing House Transportation and Infrastructure Committee Chairman James L. Oberstar, is likely to gain any meaningful traction in the short-term and possibly not until after the next Presidential election in 2012.

“If the money is going to be applied to the Highway Trust Fund and to the users prescribed by it, I think that is absolutely we would support,” said Leslie Blakey, executive director of the Coalition of America’s Gateways and Trade Corridors. “Most people in transportation would agree that gasoline taxes need to be increased sooner than 2013 in order to avoid the Highway Trust Fund being bankrupt by then. The schedule needs to be accelerated. The long-term stimulus effect of this would more than offset the relatively minimal economic drag that an increased fuel tax would have.”

Blakey added that for the relatively small increase being discussed, the return on that investment would be the buying power that the Highway Trust Fund had in the 1990s. This, she said, highlights the fact that the proposed increased likely does not go far enough, although it would be a step in the right direction. And she said revenues from other new sources dedicated to freight transportation are also needed

Aside from this bipartisan commission report, various other proposals with an eye on raising the gasoline tax have been floated recently.

One proposal came from Representative Laura Richardson (D-Calif.) in the form of legislation she introduced in September entitled The Freight is the Future of Commerce Act in the United States Act of 2010 (Freight FOCUS Act, H.R. 6291), which addresses myriad ways to address options for more efficient goods movement.

In this bill, Richardson is calling for the establishment of a Goods Movement Trust Fund that would serve as a dedicated source of funding for transportation infrastructure projects. And in order to pay for this fund, Richardson is calling for a 12 cent increase in the diesel tax paid by trucks, coupled with a $3 billion a year transfer from the General Fund into the Goods Movement Trust Fund.

Another gasoline tax-related proposal came from the American Association of State and Highway Transportation Officials (AASHTO) in October.

In a proposal made to Congress, AASHTO is suggesting to would “convert the federal tax on gasoline and diesel fuel from a cents-per-gallon basis to a percentage basis, a mechanism that could raise revenues to pay for greater highway and transit investment if the price of fuel rises in future years.”

According to AASHTO, the gas-tax option outlined would entail an 8.4% tax on a gallon of gas instead of the current 18.4-cent gas tax, and the tax on a gallon of diesel would be 10.6% instead of the current 24.4 cents. AASHTO added that it estimates the changes would potentially raise an additional $43 billion over six years, assuming the price of gasoline increases as the government projects.

By raising $43 billion over six years, this change in the gasoline tax would result in an average increase of more than $7 billion per year in revenues and would enable the next surface transportation reauthorization bill to fund $330 billion in new projects, compared to $287 billion funded under SAFETEA-LU which expired on September 30, 2009.

Even with these proposed changes, AASHTO estimates that the country will still need $565 billion for the next six-year transportation reauthorization bill, meaning even with these proposed changes there would still be a $235 billion funding shortfall.