Cheap Oil Drives Calls for Gas-Tax Hike

The collapse of oil and gasoline prices in recent months has generated plenty of ripples, from providing a shot in the arm to U.S. economic growth prospects to slathering the global oil patch with gloom, flaccid state budgets, and industry layoffs. But cheaper energy is also doing something that has been pretty much unthinkable for a generation: fueling a groundswell of support in Washington, even among some Republicans, for a hike in the gas tax.

Thanks to the plunge in global crude prices, which are down about 60 percent since the summer, U.S. drivers are cheering cheaper gasoline — about $1 a gallon cheaper than a year ago. That gives policymakers more room to hike the federal gas tax, which pays for the fund that finances roads and bridges. That fund is running on fumes because it hasn’t been adjusted since the first days of Bill Clinton’s administration.

Republican lawmakers, including senators John Thune (R-S.D.), Orrin Hatch (R-Utah), and even James Inhofe (R-Okla.), have left the door open to a hike in gasoline taxes now that consumers have some relief at the pump. Thune, the new chairman of the Senate Commerce, Science, and Transportation Committee, said this month that it is important to fund infrastructure, adding “I don’t think we take anything off the table at this point.”

Inhofe, the new chairman of the Senate Environment and Public Works Committee, told Foreign Policy that a long-term highway bill is a “top priority.” But, he said, “crafting the bill needs to take place before we can have a necessary discussion of how to fund the bill, which is why I have not yet discussed what pay-for options I would support and why everything must be on the table.”

Those stirrings on Capitol Hill have been matched by calls for stiffer energy taxes from a gaggle of heavyweight commentators, including former Treasury Secretary Larry Summers, Columbia University economist Jeffrey Sachs, Council on Foreign Relations energy guru Michael Levi, and (as many times before) conservative columnist Charles Krauthammer. “The recent decline in world oil prices is a windfall for U.S. consumers, and windfalls should be put to work rather than frittered away,” Sachs wrote in Politico magazine.

Some, such as Summers, go even further and argue that it’s time to take advantage of unexpectedly cheap energy to put a tax on carbon emissions across the economy, not just tinker with the federal gas tax. That would, in theory, help curb emissions that lead to global warming while providing hundreds of billions of dollars in revenue to fund energy research, other tax cuts, deficit reduction, and the like. A straight carbon tax has long been the preferred tool to fight global warming among economists, including many who advised previous Republican presidential candidates such as Mitt Romney and John McCain.

But the crack of daylight among congressional Republicans regarding gas taxes doesn’t mean the party has suddenly gone Pigovian. Skepticism about global warming, as well as the need to rejigger the economy to fight it, runs rampant in conservative circles.

“It’s apples and kumquats,” said Paul Bledsoe, a former Obama administration advisor who now runs a consultancy. “A gas-tax increase is politically conceivable. But a carbon tax is a theological debate — and that’s the difference,” he said.

The federal gas tax, of 18.4 cents per gallon of gasoline, has not budged since 1993. If it had kept pace with inflation, it would be over 30 cents a gallon by now. (States impose their own gas taxes, which average about 24 cents a gallon.)

That matters because the gas tax funds the federal Highway Trust Fund. But the fund is running out of money and will be broke by this summer. Everything, from materials to labor, has gotten more expensive in the last 20 years, so the gas tax’s virtual shrinkage leaves less money in real terms. And that matters, because the country’s infrastructure, including roads and bridges, has been a wreck for years and continues to receive dismal scores from civil engineers due to a lack of funds to do more than band-aid maintenance.

Raising the gas tax is gaining political momentum because cheaper oil prices have given policymakers and consumers room to absorb higher taxes. Politicians can package the gas tax as a “user fee” since it’s paid by people who use those roads, and crumbling infrastructure raises the urgency.

Yet carbon-tax champions believe the same could be said of the need for a broader, economywide fee. Thanks to a turgid picture of global oil supplies, cheaper crude appears to be a fixture for the near term at least, making it easier for the economy to absorb higher charges on energy. Like gasoline taxes, a carbon tax would be paid by the people who use that energy. And thanks to climate change, the risks are at least as dire as the state of America’s roads and bridges.

“It is exactly the same argument: We’re using the sky as a trash dump,” said Bob Inglis, a former Republican congressman from South Carolina who started the Energy & Enterprise Initiative to promote market-based solutions to climate change, especially a carbon tax. He has urged fellow Republicans, so far without much success, to put an honest price tag on the social and environmental damages caused by energy use.

“In the salad bar of life, take what you want, but pay for what you take,” he said.

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