Federal Gasoline Tax to Expire in September Unless Extended

August 19, 2011



Politically, a vote to renew the gasoline tax will come at a tough time. Gas prices have risen steadily in the past few months, and sentiment against taxes is at a high level. In a similar run-up in 2008, Republican presidential nominee John McCain called for a temporary suspension of the federal tax; earlier this week, Rep. Michele Bachmann (R-MN) pledged that the price of gasoline would fall below $2 if she were elected president. Four states have actually done temporary gas tax holidays in the past decade or so.

At the same time, the gasoline tax is coming under immense pressure; inflation erodes how far the money raised from the stagnant tax can go. In 1962, the 4 cent tax (then being used to construct the Interstate Highway System) was the equivalent of 30 cents today; the pre-increase 1992 rate of about 14 cents is equivalent to 22 cents today. Drivers are also driving more in increasingly fuel-efficient cars as proposed highway and transit expenses rise.

Time asks whether states could just take over the federal transportation role by raising their gasoline taxes as the federal one expires (although they quickly dismiss the notion). But if no action happens as the end of September approaches, such ideas might seem reasonable.

More on gasoline taxes here.

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