Gasoline prices are a hot topic. They feed debates around the water cooler, incite noon-hour rushes to fill up before price hikes, and even motivate boycotts. Because our mobile society still relies heavily on gasoline and diesel fuel for our transportation needs, this will continue to be an issue that affects just about everyone. Although prices are lower than they’ve been in previous years, they’re still trending higher than ever before.
I remember a time when gasoline was regularly under $2 a gallon (I’m sure many of you in the older generation will remember it even lower!), and yet I doubt we’ll ever see those prices again — especially if the proposed fuel tax increase goes through.
Before you start complaining, however, keep in mind that there hasn’t been an increase in the federal fuel tax since 1993. The proposed tax increase is 12 cents, split into two installments of six cents. In case you aren’t aware, the current federal tax is 18.4 cents on gasoline and 24.4 cents a gallon on diesel.
Why Is the Fuel Tax Increasing?
The main reason for the proposed increase is to fund the depleted Highway Trust Fund, which is the main source of funding for highway maintenance and repair.
Revenues from fuel taxes and other funds haven’t kept pace with the needs for highway repair and restructuring in the nation, especially since state budgets are having trouble fitting in their own transportation costs (partly due to lacking promised funds from the federal government). Although the fund has managed to stay afloat, revenues from federal fuel taxes are down because of fewer vehicles on the road per household, increased fuel-efficiency, and the effects of inflation.
Since the idea of spending more on fuel without any benefit to the consumer (except maybe a few less potholes to dodge) probably wouldn’t be well-received, senators have proposed offsetting the tax increase with the renewal of six federal tax breaks due to expire this year. Of course, this will only make a difference if you qualify for one of them.
While it’s certainly true that the nation’s roads are in desperate need of repair, some groups disagree that a fuel tax is the way to go. Some think that the federal government should defer to the states to raise funding for their own highway repair as they see fit — instead of using the Highway Trust Fund. And many politicians are afraid to touch the issue since it’s so volatile and carries such a strong public opinion.
On one thing, everyone agrees: something needs to be done.
What do you think about a fuel tax increase? Would it affect your personal finances? What are some measures (such as fuel reward cards, fuel-efficient driving, less trips, or using other transportation) you already take that would help you prepare for this increased household expense?