U.S. Should End Gasoline Tax to Pay for Roads, Boxer Says

U.S. Senator Barbara Boxer, who’s in charge of writing legislation to continue highway construction after 2014, said she favors eliminating the 18.4-cent-per-gallon tax on gasoline that pays for such work.

The California Democrat said at a hearing today she wants to replace the levy paid by consumers at the pump with a new tax paid on oil at refineries. That tax would generate enough revenue to fund highways and mass transit for six years, Boxer said.

“This could bring in more than all the other taxes bring in for transportation,” said Boxer, chairman of the Environment and Public Works Committee. “It would fund highway programs for six years, and it would do that while we do away with other fees. It’s a very exciting idea.”

The nonpartisan Congressional Budget Office projected in July that the U.S. Highway Trust Fund, which pays for road and bridge projects, will be insolvent by 2015 unless Congress raises the gasoline tax, bails out the fund with general tax dollars or eliminates most highway spending.

Congress has been gridlocked over raising the gasoline tax, the main source of revenue in the trust fund, since 2009. Revenue has declined since 2007 through a combination of a lagging economy, fewer miles driven and more efficient cars.

The gasoline tax was last raised in 1993 and has never been indexed to inflation. The tax’s purchasing power has declined almost 40 percent over that period, according to the American Association of State Highway and Transportation Officials.

Oil Tax

Boxer’s proposal would have to be approved by the Senate Finance Committee, which has jurisdiction over taxes.

Senator Max Baucus, chairman of the finance panel, appeared at the hearing and said lawmakers would make sure infrastructure would be sustainably financed as part of broader tax changes to be considered in coming months. He didn’t comment directly on the oil tax idea, which has been floated by research groups including Rand Corp. and the Carnegie Endowment for International Peace.

“In recent years, we have only been able to maintain necessary investments through transfers from the general fund,” Baucus, a Montana Democrat, said. “We’re robbing Peter to pay Paul.”

Rand in a 2011 paper said a percentage tax on oil would be simpler than the current taxing system, could be indexed to inflation and structured to fluctuate with the price of oil to keep transportation funding steady, Rand said. Producers, consumers and other users of oil, like homeowners, would pay, according to the Santa Monica, California-based nonprofit research institution.

In the current highway-funding bill, passed in 2011, Congress used $18.8 billion in general taxpayer money through fiscal 2014 to supplement the Highway Trust Fund to maintain spending on highway, bridge and transit construction needs.

The U.S. will spend $40 billion on highway construction in fiscal year 2013, as well as $11.7 billion on transit and $1.3 billion on highway-safety programs, according to AASHTO.

To contact the reporter on this story: Jeff Plungis in Washington at jplungis@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net

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