For the last several months, consumers have been celebrating plummeting prices at the fuel pump. Oil prices have dropped more than 50 percent since last year. The price of a barrel of Brent crude has fallen from $115 in June to $44 last week. With gas prices falling off the cliff, drivers will be able to save hundreds of dollars this year in fuel costs.
Unless some legislators try to take that dose of good economic news away.
That’s right. As middle-class families are getting some unexpected relief in the form of lower fuel prices, some lawmakers think that instead of consumers reaping all the benefits, the state and the federal governments should get their piece of the pie in the form of higher taxes.
The recent chorus of support for a higher gas tax, now that gas prices have become much cheaper, is in order to fix our nation’s infrastructure, which many claim has been deteriorating, with many of the nation’s roads, highways, bridges and tunnels in need of repair.
There is little doubt that a portion of our nation’s infrastructure, much of it built in the 1950s, needs an overhaul. But the situation isn’t as dire as the media and lawmakers make it sound. The Federal Highway Administration has reported that the condition of the nation’s roads have shown improvement during the last several years. According to the FHA, in 2000, 55.2 percent of the nation’s federal-aid highways had “good” quality. That number rose to 62.5 percent in 2008 and was even higher in 2010 at 64.6 percent. The number of the National Highway System bridges that were deemed “deficient” also dropped from 23.7 percent to 21.4 from 2000 through 2010.
Advocates of a higher gas tax argue that it’s high time for an increase since the current 18.4 cent tax was set more than 30 years ago when Ronald Reagan was president. Reagan, concerned with the nation’s crumbling infrastructure, signed legislation to fund the Highway Trust Fund, an agency designated to fix the nation’s transportation network.
But the federal taxes on gasoline are only part of the story. States have been piling on gas taxes that far outweigh those that the federal government has imposed. The national average for fuel tax, including the 18.4 cents federal tax, is 48.5 cents, translating to a more than 25 percent tax on a gallon of gas, now that gas prices are hovering at $2.00 a gallon. New York drivers earn the distinction of being the second-highest taxed drivers in the nation. Every time New Yorkers add a gallon of gas to their fuel tank, 68.7 cents are added to the price in the form of taxes. New York drivers dependent on diesel fuel have to pay even more taxes: 72 cents a gallon.
It would be one thing if the Highway Trust Fund would be fulfilling its original mandate of funding the repair of highways, bridges and tunnels, where the taxes are being used to benefit those who are paying them at the pump, but Congress has been quietly milking the fund to pay for other modes of transportation. A full 25 percent of the fund, last year, went to subways, bike paths, hiking trails — even landscaping — and other modes of transportation. Congress should first direct the money in the fund to where it’s supposed to go before even thinking about raising the tax on drivers.
Lower gas prices are not only providing some economic relief for drivers, but have a positive ripple effect across different sectors of the entire economy. Any consumer good that gets from point A to point B via truck or any gasoline-powered vehicle has the cost of fuel baked into its price. The price of just about every grocery item in a local supermarket includes the cost of its transportation to the store. Think of all the fuel it takes to get a fig from California to a grocery shelf in New York. Every online order has to be shipped, and shipping charges are very often a significant percentage of the total price. Sustained lower fuel prices will ultimately slash the cost of everything from refrigerators to shoe laces.
Lower prices will in turn fuel the economy. Consumers, with more money in their pockets from lower gas prices and lower cost of goods, will breathe easier and spend more, which will in turn provide a boost to the nation’s GDP. A growing economy will create a middle class with more income and provide the government with more tax revenue, funds from which money could be spent on the nation’s infrastructure. Congress has to understand that this unforeseen drop in fuel prices has the potential to put the economy on the road to a destination of much higher growth. Raising fuel taxes will only put a brake on this historic opportunity for organic economic growth.