Do Low Oil Prices Justify Raising the Gas Tax?

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Peter Fricke Contributor
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Does the Federal Highway Trust Fund need a boost from high gas tax revenues?

Raising the federal gas tax would be “misguided,” argued Chris Chocola, president of the free-market advocacy group Club for Growth.

The Highway Trust Fund, which finances federal transportation projects using proceeds from the gas tax, has lately teetered on the brink of insolvency due to declining gas tax revenues, and the latest short-term “fix” passed by Congress will expire in the spring. (RELATED: Conservatives Slam Short-Term Fix to Highway Funding)

In a recent editorial, Bloomberg View argued that the decline in the price of oil (it is currently below $85 a barrel) justifies an increase in the gas tax, but Chocola counters that not only should the tax not be raised, but that “we should not even have a federal gas tax to begin with because it finances a program that is inherently broken.”

According to the Bloomberg View editors, “the economic case for a gas tax hike is compelling,” even if the political case is not.

They point out that the gas tax was raised to its current level of 18.4 cents per gallon in 1993, but “inflation has since cut its value by 40 percent.” (RELATED: States Turn Against Electric Cars as Gas Tax Revenues Fall)

“If the tax were hiked from its current rate of 18.4 cents a gallon to 30.3 cents, gas would still be cheaper than it was on Labor Day,” according to a USA Today editorial on Sunday, which advocates raising the tax “soon while the price of oil is so low that people would barely notice.”

“Why send tax dollars to Washington only to see a portion of that money sent directly back to the states after federal bureaucrats chew up a sizable chunk of it?” Chocola asks.

He notes that, “more than 70% of all transportation spending in this country is already financed and spent at the state and local level,” where infrastructure needs are better understood and “those making the decisions are held most accountable by the taxpayers.”

Bloomberg acknowledges that point, saying that in the absence of congressional action, six states “have placed measures on the November ballot to increase spending on roads, bridges and other transportation infrastructure.” (RELATED: States Consider Increasing Gas Tax)

However, they conclude that “for the moment… low oil prices are presenting an unexpected opportunity to quickly raise the money that U.S. highways need: Simply increase the federal gas tax.”

Chocola offers a very different interpretation, saying that, “a far better solution…would be to pass a bill called the Transportation Empowerment Act,” which would “devolve the gas tax to the states, allowing each state to fund its own projects.” (RELATED: Mike Lee Would Send Highway Funds to the States)

“The Highway Trust Fund is an outdated funding scheme for America’s infrastructure needs,” Chocola claims, and “raising the gas tax simply perpetuates it.”

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