In February, the average price of gas in the United States was under $3 per gallon, but it has now risen to nearly $4.50. Since the onset of the Iran war, Americans have reportedly spent an additional $39 billion on fuel. As the summer travel season approaches, Congress is contemplating the suspension of the federal gas tax of 18.4 cents per gallon, which primarily funds highway and transit projects. Democratic Senators Mark Kelly and Richard Blumenthal proposed a 'gas-tax holiday' in March, while Republican Senator Josh Hawley introduced a bill for the same purpose. Former President Donald Trump has also advocated for this suspension. However, several key senators oppose the measure, indicating that its consideration reflects the diminishing importance of the gas tax. Severin Borenstein, a professor at UC Berkeley, noted that pausing the tax may not significantly reduce gas prices and could exacerbate infrastructure funding issues.
The gas tax, established nearly a century ago, has faced criticism from various sectors including the oil and auto industries, yet it remains a primary funding source for state road projects. Currently, gas and diesel taxes contribute 83% of the approximately $64 billion allocated annually to the Highway Trust Fund. However, the tax has not been raised since 1993, leading to a decline in its effectiveness due to inflation and increased fuel efficiency. Other countries, such as Canada and Australia, have recently reduced their fuel taxes, allowing for more substantial price reductions at the pump.
The Highway Trust Fund is projected to face a shortfall of $294 billion in the next decade, prompting Congress to explore alternative funding mechanisms, including a potential tax on vehicle miles traveled. The implications of the gas tax's decline could lead to difficult decisions regarding infrastructure funding, as projects may need to compete for general-fund revenue. Some experts argue that the gas tax has historically contributed to highway expansion without sufficient political accountability, suggesting that a reevaluation of transportation funding priorities may be necessary.