Fuel On The Fire?

The federal excise tax on gasoline is scheduled to expire on September 30.  It currently is levied at 18.4 cents per gallon at the pump and brings in about $25 billion in federal revenues annually.

Since the current tax expires on September 30 that means there will need to be an affirmative vote by both the House and the Senate, and President Obama must sign the bill, by that date for the tax to remain in effect. Almost all of the money collected from the tax goes to the Federal Highway Trust Fund which is the largest source of federal funding for road and mass transit improvements.

Are we looking at another battle on Capitol Hill?  Does it make sense for conservatives to throw more fuel on the fire? I think it would be unwise to block the renewal as the value of a good transportation infrastructure is one area of government spending that most people agree with.  It would make no sense to try to constrain this spending. In fact, the establishment of primary federal roads (referred to as "post roads") is specifically enumerated as a power of Congress in the Constitution. (Article I, Section 8).

However, is a federal excise gasoline tax the best way to provide this funding?  This tax is levied on top of state taxes that are also levied at the pump which are also used for road projects.  State taxes average about 31.1 cents per gallon on top of the 18.4 cent federal tax.  Therefore, about 50 cents of every gallon at the pump are taxes and the feds and states are fighting over the same source of revenue.

At the same time, we continue to rely on imported oil for about half of our needs for oil but we have no coherent energy policy to reduce this dependence.  This makes no sense to me from any perspective-economic,employment or national security.

Why would we not consider being a little more strategic in our thinking?  How about eliminating the federal gas tax and replacing it with a tax on imported oil?  Raise the same amount of revenue but tilt the playing field in favor of the development of domestic sources of oil.  My calculations would suggest that it would take about a 7-8% tax on all imported oil at current prices to raise the same amount of revenue as we are collecting on the current federal gas tax. This provides Exxon or BP with a choice of drilling outside of the country and importing or drilling domestically and lowering their costs by 7-8%.  We also get the added advantage of creating some very high paying jobs here as well.  All of this without any tax increase on the American people. 

Pushing this idea might also have the additional benefit of putting pressure on President Obama and the Democrats to open up drilling opportunities in the Gulf, ANWR and other areas that bear great promise.  It would be refreshing to see President Obama interested in encouraging drilling here rather than in Brazil and other countries.  In case you missed it earlier this year, the U.S. is going to lend at least $2 billion to Brazil's state-owned oil company, Petrobas, to finance exploration of an offshore discovery in Brazil.  Here is what President Obama said at that time...

We want to help with technology and support to develop these oil reserves safely, and when you’re ready to start selling, we want to be one of your best customers.  At a time when we’ve been reminded how easily instability in other parts of the world can affect the price of oil, the United States could not be happier with the potential for a new, stable source of energy.”

We have problems on top of problems but we do nothing to try to fix the problems.  If we want new, stable sources of energy shouldn't we be doing everything to develop those in our own country?

We need to start bringing some new ideas to the table.  Is the federal gas tax extension a good place to start thinking differently?  It could be.  However, we again have the practical problem that Congress is on vacation until after Labor Day and that leaves almost no time for a rationale, reasonable debate.  Why do we let Washington do this?  Everything becomes a crisis because no one is thinking strategically and systematically.

If the House Republicans want to show they are serious about turning the country around and sending a message to the country, cut the vacations short and get back to Washington, DC.  Let President Obama fly around the country to fundraisers and vacation in Martha's Vineyard.  Republicans need to show that they are serious and have serious ideas.  Because we have serious problems.  The gas tax could be the first step in reforming a tax system that would put more value on common sense than just raising dollars and cents (per gallon).