Backroom dealing will determine the outcome of the fiscal cliff negotiations. By the time a final package is crafted behind closed doors to resolve looming debt, spending and tax issues, rank-and-file lawmakers won’t have a chance to alter the contents. So speculation is running wild regarding what surprises might emerge from the summit between the White House and Capitol Hill leadership that will enable Washington to continue its big-spending ways. One little-noticed possibility is the idea of hiking the federal tax on gasoline.
Each time someone tops off the tank at a filling station, Uncle Sam pockets 18.4 cents. States impose levies of their own that range from a high of 50.4 cents in California to a low of 16 cents in Oklahoma. Expressed that way, the amount seems trivial. That creates the temptation to add “just a few cents more” to rake in extra millions. Maryland Gov. Martin O’Malley, for example, wants to grab an extra 15 cents for every gallon of petrol sold in the Old Line State, padding his expense account by $600 million annually.
A lot of groundwork has been laid to allow politicians like Mr. O’Malley to claim there is a need to hike the gas tax. Special-interest groups have perpetuated the myth that the gas tax is dwindling and isn’t raising enough revenue at the state and federal level. Anyone who has had to pay a service station cashier recently isn’t going to feel like he’s getting off easy. Prices are, on average, $1.40 a gallon higher than they were when President Obama took office. Those who want to see that price rise yet more claim gas tax revenue is plunging because so many people are driving electric and hybrids cars that fuel economy has soared.
That might sound plausible, except there were only about 2 million trendy eco-mobiles in the U.S. vehicle fleet as of last year. With 246 million registered vehicles sharing our roads, the fuel-sipping ways of the Toyota Prius aren’t going to accomplish much beyond contributing to the owner’s feeling of personal satisfaction. Americans used roughly the same amount of gasoline in 2006, before the Great Recession, as they did in 2010, according to the latest available Federal Highway Administration data.
The St. Louis Federal Reserve charts the ups and downs of various sources of government revenue, and the gasoline tax comes out as one of the most reliable sources during a downturn. Federal income tax revenue, for example, only returned to pre-recession levels last year while fuel tax receipts rang up 9 percent higher.
Taxpayers are already paying enough, considering how hard it is to get by with the country’s economic engine running on empty. They don’t need higher taxes on their gas, and they don’t need higher taxes on job creators — known to the envious as “the wealthy.” What they truly need is representatives in the statehouse and in Washington willing to recognize the cause of the fiscal malaise is spending, not a lack of revenue.
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