As Gas Prices Fall Toward $3, a New Call for Gas Tax

CNN reported that the head of the Chamber of Commerce, Thomas Donohue, wants Congress to review the amount of the tax. The last time it was hiked was in 1993 when it went to $0.184.

After reaching nearly $4 in mid-2011, the price of a gallon of regular, on average nationwide, has dropped to about $3.35. In some states the price is much lower. The AAA Fuel Gauge report shows a drop in Texas, which is the second largest state by population, to $3.11.

The parties that have pressed for a higher federal gas tax ignore the fact that real income in the United States has not improved in a decade. However, ten years ago gas prices were $1.43, so they are more than 2.4 times higher today. The prevailing theory is that lower gas prices should improve the U.S. economy overall, both for individuals and large industries that use it.

A $0.10 per gallon increase in the federal gas tax would add more than $100 to what people who drive long distances pay per year. For large trucking companies the pain would be much greater. The increase may not seem like very much on paper, but for people living on the razor’s edge financially, any additional burden can be heavy. Obviously, if gas prices drop sharply, some of the harm would be mitigated.

The argument about the tax always turns to the value of better built and repaired highways and roads, and what the improvement does for drivers. Probably not very much for now. There is very little evidence that roads that need minor or modest repairs are roads on which people will not travel.

The belief that a new gas tax is the best way to repair America’s highway infrastructure has some merit. What it does to the general economy is just as important a question.