Election-year gimmick could jeopardize infrastructure
Last month, a group of six U.S. Senate Democrats, four up for reelection, proposed a federal gas tax holiday through the end of 2022. One of the bill’s authors said it will help people “struggling with high costs for everything from gas to groceries.”
However, those are pretty big expectations for suspending an 18.4-cent-per-gallon gas tax that might cost the average motorist about $2 a week. I say “might” because the gas tax, unlike a sales tax, is not collected at the point of retail sale. Therefore, it is just one of many factors influencing the retail price of gas, the largest being the cost of crude oil.
A Transportation Investment Advocacy Center study found that, on average, one-third of a state gas tax change — increase or decrease — is passed on to consumers in the retail price of gas on the day the change takes effect, with the impact diminishing quickly. This conclusion was reached after the group analyzed 113 state gas tax changes occurring between 2013 and 2018, 75 increases and 38 decreases.
The proposed federal gas tax suspension is unlikely to provide relief at the pump for Wisconsin families. But it would undercut the largest revenue source for federal public transit and highway improvements and result in an estimated $20 billion charge on the nation’s credit card to fill the hole.
Inflation is a genuine concern, costing the average U.S. household $276 a month, according to Moody’s Analytics. Still, I have yet to find an expert who thinks this measure is a solution to rising gas prices or inflation. What’s more, some believe it could add to inflationary pressures.
Ed Mortimer, vice president of transportation and infrastructure at the U.S. Chamber of Commerce, said suspending the gas tax is “a temporary stunt that … has no promise of actually helping lower prices for consumers or improving the economy.”
The idea of a gas tax holiday is nothing new. It has been trotted out in the past. Hillary Clinton and John McCain both sent up a trial balloon during the 2008 presidential campaign, just to have Barack Obama pop it.
Candidate Obama said at the time and in the middle of the Great Recession, “We’re arguing over a gimmick that would save you half a tank of gas over the course of the entire summer so that everyone in Washington can pat themselves on the back and say they did something.”
If this measure is enacted, all our elected officials in D.C. will have done is undermine the user fee system and the Highway Trust Fund, comprised of highway and mass transit accounts, by setting the example that the federal gas tax can be turned off and on depending on the price of gas, the economy, and the election cycle.
This proposal has no upside and some real-world pitfalls.
To really save Wisconsin residents and businesses time and money, let’s focus on putting the Infrastructure Investment and Jobs Act dollars to work and address the state’s well-documented backlog of transportation system repairs and maintenance.
As Marc Goldwein, the senior director of policy at the Committee for a Responsible Federal Budget, summed it up, “Whether you care about the deficit, whether you care about infrastructure, whether you care about climate, or whether you care about getting inflation truly under control, this moves in the wrong direction.”
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