Do You Support Increased Taxes on Fuel?

by Jessica Sommerfield · 9 comments

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? 

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{ read the comments below or add one }

  • Nate says:

    Raise the tax.

    In that this is a major source of funding for infrastructure improvements, it is more than fair that those that use the roads pay more for it’s upkeep and repair, as needed.

    Furthermore, it’s ridiculous that gas doesn’t cost more than a gallon of milk. Gas is a precious resource whose careful use is vital to our economy. It should be valued as such and only used when absolutely needed. Especially when you consider its deliterious effect on our environment. It’s price should start to reflect that reality.

    As for those that are concerned with the overall price of gas… The Federal Tax component has very little to do with the overall price. If you examine the breakdown, more often than not it comes down to each state and the amount of tax that they apply. If you have a quibble, it is with your state goverments.

    • David @ says:

      Good points you are bringing up Nate. I always favor taxes that offer the right incentives. Unlike income taxes, the better behavior of driving less will mean a lower tax bill.

      And you are right – the tax is essentially going to add $0.50 to $1 per tank. It adds up for the government, but hardly a budget killer for practically everybody.

  • Scott says:

    Yes the federal gasoline tax needs to be increased. And the state gasoline taxes should be replaced with a tax that is paid annually when you register your vehicle that is based on the number of miles you drove the previous year and the weight of the vehicle.

    • David @ says:

      Interesting idea, but how will everyone proof that they just don’t drive that much? Don’t make me line up at the DMV each year just so they can get a reading!!

  • Adele says:

    Ah, sorry, do not agree with the additional tax.

    I would like to know where the present level taxes go that I pay on a gallon of fuel here in New York City, before I’d agree to give any more money for anything. I’d fed up with politicians using money like it’s from a board game.

    If I felt remotely like the money I already pay in taxes actually was used prudently instead of for feathering nests and garnering votes, I’d be willing to pay even more to fix things up here. But I’ve seen too many sweetheart deals and yet still deal with car-breaking potholes in the City. No thanks!

    • David @ says:

      Good luck with figuring where the money goes.

      The good news is that the proposed increase is small, so it won’t be a huge difference to most household’s finances either way. What I’m afraid of is once the federal proposal is passed, that states tack on their increases.

  • Phil says:

    There are just so many holes in this article…

    But here is something I find interesting. I have heard that the government can make 27 cents per gallon sold, and the oil company 7 cents per. And then the federal government has the gall to call the oil companies before congress every time there is an increase in gas.

    Seriously, there is enough money for the government to do it’s job. They just need to spend it wisely.

    And before you go thinking, “well this guy is just towing the conservative line” let me say this…I am a school teacher who votes down every bond and levy that comes my way. And that included the building of a brand new school that my kids currently attend. Seriously there is enough money in education too. We just spend and spend and spend.

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