One fiscal cliff fix: Raise the gas tax

November 28, 2012: 10:36 AM ET
gas pump
NEW YORK (CNNMoney)

As lawmakers race to negotiate a deal to avoid the fiscal cliff, some experts say one tax increase should be on the table: a gas tax hike.

Currently at 18.4 cents a gallon, the federal gas tax is used primarily to build and repair roads, bridges and other transportation infrastructure. The tax raises about $32 billion a year.

But that's not enough. The government hands out about $50 billion a year to states and towns to help with road costs. The difference comes out of general funds or has to be borrowed. Meanwhile, the gas tax hasn't been raised since 1993.

"Establishing a sustainable resource base for transportation needs to be part of any grand bargain," said Emil Frankel, a former transportation expert in the George W. Bush administration and now director of transportation policy at the Bipartisan Policy Center. "In the short run, raising the gas tax is the best way to do that."

Raising the gas tax was one of the recommendations of the Simpson-Bowles debt reduction plan in 2010. The plan called for a 15 cent-a-gallon hike to the gas tax, a level that would basically cover the current shortfall in the transportation budget.

Others went further. In a 2010 letter to the commission Delaware's Democrat Senator Tom Carper and former Ohio Republican George Voinovich proposed a 25 cent-a-gallon hike in the gas tax, with the additional 10 cents a gallon going toward debt reduction. The pair estimated it would generate $83 billion over five years to chip away at the debt, and an additional $117 billion for road repairs.

Related: Fiscal cliff tax deal -- getting to $1 trillion

But not everyone is convinced a gas tax hike is the way to go.

The gas tax is politically unpopular, mostly because it's regressive -- meaning it hits the poor more than the rich. It's also regionally biased. Most big bridges and highways are near cities, yet those in rural areas would pay the same in taxes.

"The burden would fall on the great middle class, not on the millionaires and billionaires," said Ken Orski, publisher of the infrastructure industry publication Innovation NewsBriefs, who himself supports an increase in tolls as a way to cover the funding shortfall. "That's why the White House is staunchly opposed to such an increase, and why there's virtually zero support in Congress."

That's one reason the tax hasn't increased in nearly 20 years, even as labor, steel and asphalt costs have risen sharply. Plus, as fuel efficiency increases, Americans can put more miles on roads while at the same time buying less gas, worsening the shortfall.

Other ways to plug the funding gap include instituting a mileage-based driving tax, shifting more of the burden to the states or taping private funding sources that would then charge the public user fees.

Greenspan: Government cuts key to debt fix

Calls to congressional staffers revealed little in the way of an effort to raise the tax at this time.

Still, as one Democrat staffer put it, with Republicans softening to the idea of raising taxes in general, "possibilities for this sort of talk has at least opened a bit."

Join the Conversation
Overnight Avg Rate Latest Change Last Week
30 yr fixed4.25%4.27%
15 yr fixed3.23%3.21%
5/1 ARM3.37%3.37%
30 yr refi4.19%4.36%
15 yr refi3.18%3.17%
View rates in your area
 
Find personalized rates:
Rate data provided
by Bankrate.com
Search for Jobs