I originally published this for KTSW 89.9 FM – Article can be found here
With the presidential elections thankfully in the past and with Democrats holding a majority in the House of Representatives and Kamala Harris holding the tie breaking vote in the Senate, economic issues are now front and center on the Democrats minds. All of this brings me to something that will most likely become a hot topic very soon and that is… The federal gasoline tax.
In case you weren’t aware, for every single gallon of gasoline that we purchase, there is currently an 18.4 cent federal tax automatically tied into the price. On top of that, Texas charges its own state gas tax, which is currently 20 cents per gallon. As of now, I reside in Illinois, where the gasoline tax is actually 39.2 cents per gallon. The 3rd highest in the nation. This means that for every gallon of gas you purchase, 38.4 cents of that total per gallon price is actually because of additional taxes (in Texas). Meanwhile, in Illinois, the cost is 57.6 cents per gallon in taxes.
Back in 2018, Donald Trump floated the idea of raising the federal gasoline tax by 25 cents to help pay for the country’s infrastructure projects such as the rebuilding of roads, rail lines and bridges which are in desperate need of maintenance. However, once he brought up that idea, he immediately faced fierce opposition from opponents on both sides. The issue was immediately shut down and other matters were then brought up. The federal gas tax topic was then buried, until very recently.
Only a few days ago, specifically Thursday, January 21st, former Mayor and Presidential hopefully Pete Buttigieg sat for his confirmation hearing after being nominated as Transportation Secretary by Joe Biden where was asked a series of questions during the process. Since this role would put Buttigieg in charge of the railways, trains, highways, roads, bridges among other methods of transportations, the issue of raising the gas tax was brought up in order to help rebuild the nation’s infrastructure which has an estimated cost of over 2 trillion dollars. Not soon after even mentioning the possibility of raising the gas tax, his comments had to be walked back as well as clarified. However, once that topic has been brought up at that level, chances are, it will not go away, in fact, I do foresee a raise in the federal gas tax coming very soon and there are a few reasons why.
Reason 1: It is of no secret that the nation’s highway systems and bridges are in desperate need of repair. With rising costs of constructions and raw materials to help repair all of these items, the price tag will come at a substantially high cost. Since the U.S. government is technically in debt of around 28 trillion dollars, the government will need the money, and lots of it.
Reason 2: Hybrid cars. Hybrid and electric cars specifically. These alternatives to gas consuming vehicles are great for consumers, however, as more and more people buy cars that use other forms of energy rather than gasoline, this will cause a decrease in the amount of federal taxes being collected on every gallon of gas. This is what we call an unintended consequence. Even though the reasoning is sound for buying an electric vehicle, there are consequences to that decision. Even the state of Illinois discussed the idea of taxing electric vehicle drivers up to $1,000 to help pay for roads since they wouldn’t be consuming as much gas. That idea was later rejected but a tax of $100 was imposed on any purchase of an electric vehicle to help pay for roads.
Reason 3: The vehicle motor tax. With the rise of electric cars that do not need gasoline and the need for more money as stated in reason 1, the vehicle motor tax is now being brought into serious discussions. What is the vehicle motor tax? Well, rather than having people pay a tax on each gallon of gas, drivers would be charged a tax on every mile they drive. That’s right. For example: Say you take a road trip of 1,000 miles from Austin to Chicago, rather than paying a gasoline tax when you fill up, you would be charged a tax for each one of those miles. This means that electric vehicles couldn’t escape the tax either. No one could. Countries in Europe use this type of tax and while there are implications since we are a combination of states rather than countries as is in Europe, the federal government has jurisdiction over all of them.
Watch carefully. These types of taxes have a way of sliding under the radar and surprising us down the road. Many gas pumps display the taxes you are paying on the pump itself. So if you see any of those numbers change, now you will know why.
I created an audio segment about the gasoline tax which can be listened to below.
Thank you for reading.