I take strong exception to the Oct. 29 editorial calling for an increase in the federal gasoline tax to help reduce the budget deficit. It would be among the worst possible approaches.
While such an increase might be justified if it were a user fee -- that is, if the revenues generated were utilized to provide services related to the payment -- it is difficult to justify when it is used for general government purposes, such as deficit reduction. For a gas tax increase would be extremely regressive.
As one's income decreases, the percentage of one's income that is taxed by this mechanism actually rises; 23.2 percent of gasoline excise tax is generated from families earning less than $20,000 a year, who account for just 10.5 percent of our total economic income. Conversely, only 5 percent of this excise tax is levied against families earning more than $100,000 a year, those who account for about 15 percent of all economic income.
While most excise taxes are regressive, it would be particularly egregious to impose such a tax on products the consumption of which are nonelective. There is, of course, ample precedent for such a principle. Many states impose a sales tax on food consumed in restaurants, a presumed nonnecessity, but exempt groceries from the tax. Regardless of income, we have to eat. And I would suggest that, in today's society, there is often little practical alternative to the automobile for many of our daily trips; 35 percent of household travel is either to work or work related, and an additional 34 percent is for family business, shopping, medical, school or church trips.
According to a Wharton Econometrics analysis, a motor fuels tax increase not only would be unfair to low- and moderate-income families, but it is bad for all America. Compared with generating comparable amounts from an oil import fee, an income tax surcharge, a corporate tax increase or a tobacco tax increase, a gasoline tax increase would have the greatest negative impact on unemployment and our gross national product. It would also have a greater inflationary impact on the economy than any of these except an oil import fee, the inflationary impact of which would be similar to that of a gasoline tax increase.
A 10-cents-per-gallon gasoline tax increase, when used for deficit reduction purposes, would add 80,000 people to the unemployment rolls next year, and 180,000 by 1990, and the GNP would decline by $10 billion. The consumer price index would rise by 0.3 percent.
I can see no logical rationale why an individual's contribution to deficit reduction should be based upon his or her number of miles driven. The nexus simply escapes me.
If reasons of equity and economy are not sufficient to kill a gasoline tax increase, perhaps one should examine the devastating impact that a federal motor fuels tax increase would have on transportation in this country.
Our nation's annual federal-aid highway needs have been documented as being in the $20 billion to $25 billion range. The federal government should invest $20 billion to $25 billion a year simply to maintain current highway service levels. The highway/transit law enacted in April over the president's veto funds our highway program at less than $14 billion.
These few numbers should help explain the hand-wringing of those of us on committees in Congress with jurisdiction over such matters. We are failing to meet our country's transportation needs, and we know it, and it is most frustrating. It is particularly frustrating when we note that our nation's highway users have already contributed $10 billion in user fees that we have been prevented from using. This $10 billion is kept on balance in the Highway Trust Fund so that, on paper, our nation's deficit will appear smaller than it actually is.
At a time when the federal government is unable to meet our federal transportation needs, we must depend on states and cities to bail us out. In 1986, 27 states considered legislation to increase their motor fuel tax revenues, following a trend we have seen over the past few years. This trend, though, is likely to come to a halt if the federal government imposes a motor fuels tax increase of its own. Such an increase would certainly inhibit the ability of the states to raise their own fees.
There is one additional effect of a federal motor fuels tax increase. Because of the elasticity of demand for motor fuels, a federal tax increase would reduce the amount of revenues generated by state taxes at their current rates. By the fifth year of a 10-cents-per-gallon federal tax increase, states would be losing almost $1 billion a year. We must not ask the states to help meet federal needs on the one hand, while we are picking their pockets with the other.
-- Glenn M. Anderson The writer, a Democratic representative from California, is chairman of the Public Works subcommittee on surface transportation.