President Donald Trump signaled Wednesday that he’s open to raising the federal gasoline tax to pay for infrastructure spending, but hiking the fuel levy for the first time in about 25 years faces significant hurdles on Capitol Hill.
The issue has long been a dicey one in tax policy. Increasing the price of gas at the pump is seen as having a disproportionate effect on middle- and working-class Americans and could be seen as a violation of the pledge many Republicans have taken to oppose tax increases.
But Washington’s reluctance to raise federal fees on gasoline and diesel has put the nation’s ability to fund infrastructure improvements on shaky ground.
The gas and diesel taxes contribute most of the revenue that funds the Highway Trust Fund, which accounts for the lion’s share of federal spending on highways and mass transit. The tax has remained unchanged since 1993 and is not adjusted for inflation, so its purchasing power has diminished as construction costs have risen and fuel efficiency improvements have cut down on the amount of gas Americans consume.
Congress has kept the trust fund solvent by shoring it up with $143 billion in general revenue since 2008, according to the Tax Policy Center. The patch job will allow the fund to cover the spending it has already approved for the next two years, but it will once again face shortfalls in 2021.
“I’m not running for Congress, so I’m in favor of it,” said Richard LeFrak, a prominent real estate developer and former infrastructure advisor to Trump.
“In real terms, the gas tax is actually far less than it was in 1993 when they imposed it. And if they did adjust it for inflation or adjust it for the fact that your car is getting much more mileage than it used to, then it actually would produce tens of billions of dollars of annual revenue that could be reinvested back into infrastructure in the country.”
The Congressional Budget Office estimates that a 1-cent rise in the tax would increase the trust fund’s revenues by $1.5 billion to $1.7 billion…