02/13/2018

Republicans Consider The Unthinkable: A Gas Tax Increase To Pay For Infrastructure

Josh Siegel, Washington Examiner

Republicans are weighing whether to raise the federal gas tax. It's an idea they are prone to hate, but they may need it to pay for President Trump’s infrastructure investment plan.

Supporters of the idea note that the tax hasn’t been raised since 1993 and have plenty of evidence that resistance to a hike is wearing down.

The U.S. Chamber of Commerce recently called for the Trump administration and Congress to raise the gas tax by 25 cents per gallon to help pay for an infrastructure package, projecting it would generate more than $375 billion over a decade. For 25 years, the federal tax on gasoline has held steady at 18.4 cents per gallon and 24.4 cents per gallon for diesel. It is not indexed to inflation.

The Republican chairman of the House Transportation and Infrastructure Committee, Rep. Bill Shuster of Pennsylvania, prodded colleagues at the recent GOP retreat to consider setting aside years of opposition and raise the tax.

And perhaps most revealing, some of the most conservative House members who heard Shuster’s pitch are open to it.

That includes Rep. Thomas Massie, R-Ky., an independent-minded conservative who drives an electric-powered Tesla, detests government waste, and is always liable to surprise.

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The Reagan Tax Cuts Worked

Thanks to "bracket creep," the inflation of the 1970s pushed millions of taxpayers into higher tax brackets even though their inflation-adjusted incomes were not rising. To help offset this tax increase and also to improve incentives to work, save, and invest, President Reagan proposed sweeping tax rate reductions during the 1980s. What happened? Total tax revenues climbed by 99.4 percent during the 1980s, and the results are even more impressive when looking at what happened to personal income tax revenues. Once the economy received an unambiguous tax cut in January 1983, income tax revenues climbed dramatically, increasing by more than 54 percent by 1989 (28 percent after adjusting for inflation).

 

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