The arguments for upward adjustment to both levies are as familiar as they are common-sensical. Fuel taxes, which provide a dedicated revenue stream for the federal Highway Trust Fund, enforce a rough “user pays” principle for federally subsidized roads and bridges. Yet drivers and trucking companies have experienced 28 years of fuel tax cuts as inflation has eroded the value of the levies, even as traffic — and stress on the roads — has increased. Instead of creating an incentive to limit driving, which produces about 24 percent of U.S. carbon emissions, federal fuel tax policy has been encouraging it.
Yes, excise taxes are regressive, in that fuel costs represent a larger share of poor people’s budgets than rich people’s. The mitigating factors are that pothole-free roads save poor people (and everyone else) on repairs and accidents, and that fuel taxes also fund mass transit, which low-income people rely on disproportionately.
The Biden administration delivered the apparent death blow to a higher fuel tax on Monday, when White House press secretary Jen Psaki ruled it out as a violation of President Biden’s promise not to increase taxes on people earning less than $400,000 per year. He never should have made such a promise, let alone have enforced it in such a doctrinaire manner, especially because the increase under discussion would have only indexed current fuel taxes to future inflation, not raised them to compensate for the past. The resulting increase in gasoline prices would probably have been less than a penny the first year. Still, in sheer political terms, we can see why the White House took this position: to avoid being branded a promise-breaking tax-hiker in Republican ads later on.
It’s a sad but not unfounded commentary on the current political climate, in which there could be no guarantee for the president that the GOP would not blame him for accepting their own negotiators’ proposal. Given the small amounts of revenue ultimately at stake — $2 billion — Mr. Biden’s risk aversion on this point, while frustrating, is not unduly costly.
At least that’s true in financial terms. In symbolic terms, however, even a modest hike in federal fuel taxes might have broken the 28-year-old taboo, opening the door to the more substantial future increases the country needs. The only good news is that 30 states have increased fuel taxes since 2013, according to the National Conference of State Legislatures, and that 22 of them, plus D.C., have imposed some form of variable-rate mechanism to maintain their value in real terms.
These developments at the state level, which for the most part have not led to voter revolts, suggest that Washington may be as mistaken about the politics of gas taxes as it is about the policy.
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