A Tax that Helps America Stay Competitive

The federal gas tax of 18.4¢ per gallon is set to expire at the end of September. Today’s New York Times has an editorial titled The Clear Case for the Gas Tax, enumerating several reasons why this tax should not be allowed to expire. The money collected goes to the Highway Trust Fund, which in turn creates jobs and upgrades our deteriorating infrastructure.

No doubt, the Tea Party Republicans will oppose a proposed extension of this tax, claiming that in these tough times we need to reduce the amount of money that the government collects. They will most certainly ignore the fact that by further depleting the Highway Trust Fund, we will move construction workers from the role of tax payer to the role of unemployment insurance recipient.

There is a very small grain of truth to the Tea Party Republicans’ assertion. One of the downsides of the gas tax is that a poor person who drives 12,000 miles per year (the EPA estimate of average American’s driving habits) pays roughly the same tax as the millionaire who drives 12,000 miles per year. This makes the gasoline tax a regressive tax, i.e. one that has a bigger impact on those with lower incomes.

To ameliorate this disparity, in addition to extending this tax, Congress should address the issue of its impact on the poor.

At the current rate, a driver who gets 20 miles per gallon and drives 12,000 miles per year pays $110.40 in federal gas tax.

But extending the current gas tax is not enough. Congress should increase the tax for a number of reasons. It would more quickly replenish the Highway Trust Fund, and consequently create more middle-class jobs.  Any increase in the price of gasoline helps discourage driving and decreases the cost of dealing with additional pollution and its health issues. While any tax increase would be perceived as an outrage by the Tea Party Republicans, our gas taxes are significantly lower than those in Europe (which also, by the way provides inexpensive and effective medical care to all, not just the wealthy).

While taxes are good in that they provide jobs, essential services, and infrastructure, these taxes must not be regressive.  Doubling the gasoline tax would cost the average driver $220.80 per year. Insignificant for the wealthy, but that $4.25 per week might make the difference between a child in a poor family getting a decent meal or going hungry one more night.

So while Congress should double the federal gas tax, it should also ensure that the burden does not fall upon those who could least afford it. Any legislation should include a tax credit of around $200 for automobile owners earning less than a set amount, say $30,000 per year. This way, the burden will not fall upon the poor as so many other taxes do.

Such a progressive proposal has as much chance of passing in the Tea Party controlled House as me becoming an Olympic athlete. But without improving our infrastructure, America will continue down the path of becoming a first-world nation with third-world services. And not having this discussion will ensure the Tea Party mantra of tax elimination will continue to destroy America.