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12-Cent Rise In Federal Tax On Gas, Diesel Proposed By Pair Of Senators

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Two facts sit in opposition to each other in Washington, D.C., and have for many years.

First, raising taxes--in any way, for any purpose, under any circumstances--is virtually impossible.

Second, the U.S. Highway Trust Fund is broke, because the Federal gasoline tax hasn't been raised in two decades and continually improving fuel economy means new cars use less gas to cover the same miles--meaning lower revenues.

DON'T MISS: All Taxes Are Automatically Always Bad; Are Potholes Worse?

Now, two senators have introduced a bill that would raise the Federal tax on both gasoline and diesel fuel by 12 cents--it's currently 18.4 cents--over two years.

Two 6-cent raises

According to the Associated Press (via the Boston Herald), Senators Bob Corker [R-TN] and Chris Murphy [D-CT] have proposed a pair of consecutive raises of 6 cents per gallon over two years.

The Federal gasoline and diesel fuel taxes would then be indexed to keep pace with inflation.

ALSO SEE: Highway Spending Bill To Bar Hybrids From Carpool-Lane Incentives?

While the plan wouldn't compensate for the loss of revenue to due improving average gas mileage, it would boost the Federal funds for highway repair and construction by roughly two-thirds.

Transit to lose parity with parking

To offset the political unpalatability of raising taxes, the revenue would be offset by cuts in other taxes. The Senators identified six of 50 Federal tax breaks due to expire this year that they say would compensate for the increase in the fuel taxes. Those are:

  • a research and development tax credit
  • certain types of small business expensing practices
  • the state and local sales tax deduction
  • increasing employer-provided transit benefits to the same level as parking benefits
  • a deduction for spending by teachers on classroom supplies
  • an increased deduction for land conservation and easement donations

As the AP story notes, the last time the Federal gas tax was raised was 1993, as part of an effort to cut the Federal budget deficit. But that rise in taxes played a role in the Republican takeover of the House of Representatives in the following year's elections.

Rush hour traffic in Washington, D.C. (photo by Flickr user haddensavix)

Rush hour traffic in Washington, D.C. (photo by Flickr user haddensavix)

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No action until after elections?

In an interview on Tuesday, John Bozzella, president and CEO of Global Automakers, suggested to Green Car Reports that the Highway Trust Fund might not see legislative action until the end of the year.

That could come during either the lame-duck session after November's midterm elections or very early in January after the new Congress is sworn in.

MORE: Should Higher Gas Mileage Come With Higher Gas Taxes Too?

In the interim, he said, it seems likely that Congress will have to put together a patchwork of temporary funding to keep Federally-funded highway work going. Congress has repeatedly made up for shortfalls in the Trust Fund by allocating general revenue to cover the shortages.

The Federal Highway Trust Fund will next run out of money in late August this year.

The group Bozzella heads, Global Automakers, is a D.C. lobbying organization representing the interests of non-U.S. automakers that sell vehicles in North America.

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