How Much Money Would Proposed Gas Tax Increases Raise?

Industry News / Infrastructure Funding

January 31, 2019

How Much Money Would Proposed Gas Tax Increases Raise?

One year ago, the U.S. Chamber of Commerce proposed raising the federal gas and diesel taxes by 25 cents over the next five years and indexing for inflation and improved fuel efficiency. U.S Representative Earl Blumenauer (D-OR) reportedly will soon introduce a bill calling for 5 cent increase per year for five years (5×5), plus indexing for inflation.

What impact would a 5×5 tax increase have on the Highway Trust Fund?

Using the latest forecast from the Congressional Budget Office (CBO), a recent report from the Eno Center for Transportation estimates that a 5×5 tax increase would boost revenues into the Highway Trust Fund by $372.5 billion over a ten-year period.

The Eno report assumes that the tax increase wouldn’t reduce demand, pointing out that “the price of gas routinely fluctuates by 30-40 cents per gallon over the course of a few months without noticeably affecting demand levels.”

The increase would have an offset effect on income tax receipts, because businesses would be able to deduct the increased expense. As a result, the report estimates that income tax revenues will drop by $86.3 billion. “The offset doesn’t matter for the Highway Trust Fund,” states the report. “It is the general fund’s problem.”

Eno estimates that the 5×5 increase would produce an additional $20 billion in annual highway spending above current levels, and an additional $3 billion annually for mass transit.

Finally, Eno calculated that just to maintain highway spending for a decade at baseline spending levels would require an immediate 8.5 cent/gallon tax increase. To maintain current baseline spending levels for mass transit for the next decade would require a 13.5 cent tax increase.

To view the report, click here.

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