An Argument For Higher Gas Taxes

President Trump is reportedly considering a 25-cent-per-gallon increase in federal fuel taxes, which haven’t changed since 1993. That’s an idea worth considering.

Recently Democratic Senator Tom Carper of Delaware said that President Trump was floating the possibility of a fuel tax increase of 25 cents per gallon to pay for his new infrastructure plan. If enacted, this would be the first increase in the federal gasoline tax since 1993.

I confess that I don’t like to pay taxes. Like most people, I feel that we are generally overtaxed. On the other hand, I also don’t like budget deficits. I think it’s irresponsible to push bills onto our children.

Paying for Infrastructure

So if we deem something important enough to spend money on, we have to find ways to pay for it. Enter the president’s recently proposed $1.5 trillion infrastructure plan. I won’t debate the plan here, but let’s assume it has enough votes to pass. How do we pay for it?

We could further increase the federal deficit. We could cut spending from some other programs. Or we could raise taxes. It will probably come down to a combination of the three choices, but to the extent that taxes need to be increased, I would argue for increasing fuel taxes.

The Case for Higher Fuel Taxes

There are several reasons I would favor higher fuel taxes, which are influenced by my outlook. So let me first explain that.

I am concerned about dependence on a depleting resource that adds pollutants to the environment every year. This dependence poses a risk to national security (albeit less so in recent years because of the shale oil surge). In addition, oil price shocks are a risk to the economy. Therefore, I believe we need to limit our level of dependence on crude oil, and to shift to more sustainable energy sources.

Raising fuel taxes would help achieve these objectives. Higher fuel taxes could:

  • Lower oil demand, which would help preserve our remaining reserves.
  • Level the playing field with alternative energy options, without picking specific technology winners.
  • Reflect some of the negative externalities that are not currently priced in (e.g., carbon dioxide emissions).
  • Encourage mass transit.

Optional Taxes

But there is one other huge reason I favor fuel taxes — and consumption taxes generally. I prefer to have some control over how much I am taxed.

I can make a number of choices to offset the impact of higher fuel taxes. I could get a more fuel-efficient or electric vehicle, carpool or take mass transit to work. Longer term, I could try to ensure that my job isn’t too far from my home, minimizing my commute.

The biggest downside of higher fuel taxes is that they are regressive. In other words, they hit lower-income Americans disproportionately. There are ways to address that (e.g., allowing a tax deduction for lower-income Americans), but that would also potentially lower the revenue such a tax would generate.

But consider that the tax on a gallon of gasoline, relative to the price of the gas, has been declining for years. In 1993, the federal excise tax on gasoline was raised to 18.4 cents per gallon. The average retail price of gasoline in 1993 was about $1.05 a gallon. So 17.5% of every dollar spent on fuel went toward federal taxes.

Today, retail gasoline prices are $2.75 a gallon, but the federal gasoline tax hasn’t increased. That means only 6.7% of every dollar spent on gasoline now goes toward federal excise taxes.


I am not a fan of big taxes or big spending. But some level of federal government spending is required, and money has to be available to pay for worthwhile proposals. Increasing gasoline taxes to pay for government spending — such as the president’s new infrastructure plan — would have a number of benefits. The net impact would be a shift in the direction of a cleaner economy, more discretion for citizens over the taxes they pay, and a lower financial burden placed on future generations.

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6 thoughts on “An Argument For Higher Gas Taxes”

  1. Robert – I completely agree with you. But I do have to comment that it seems completely backwards for the US government to be funding operating expenses with debt and to use a tax increase to fund capital improvements.

  2. “I can make a number of choices to offset the impact of higher fuel taxes. I could get a more fuel-efficient or electric vehicle, carpool or take mass transit to work. Longer term, I could try to ensure that my job isn’t too far from my home, minimizing my commute.”

    We may well need the taxes, but not for those reasons:

    Electric vehicle – ridiculously expensive, and functionally useless for longer trips. Only useful if you are rich enough to carry the cost of two specialized vehicles, one for local trips and one for other trips.

    Carpool – in many cases, absurdly time-consuming. The days of the factory whistle, of everybody getting to work and leaving at exactly the same time, are mostly long gone. In today’s economy, carpool members have little assurance that it will actually be OK on any given day for them all to arrive at work at the carpool time. They have no assurance whatever about being able to leave work at the carpool time. So they must waste immense amounts of time waiting for each other, to say nothing of taking the tedious Grand Tour to and from work each day.

    Mass transit – in the USA, slow, tardy, and unreliable – utter rubbish. There’s a political problem (and there’s no viable way to fix it) – transit operators figure they are “serving a certain clientele” and thus have no duty at all to do their jobs well. There’s also a cultural problem – US-ians often see it as beneath their dignity to perform certain kinds of service jobs well. There’s also the issue that transit only runs somewhat well (as gauged by abysmal US standards) in very expensive areas.

    Job close to home – fat chance. The billionaires who dictate job locations usually choose prestigious – i.e. fantastically expensive – areas that fit well with their gargantuan egos. Think $7000/month for an absurdly cramped Silicon Valley apartment. So in general only the “1%” (or the “0.2%” in Silicon Valley or Manhattan) will be able to live decently at a reasonable distance from work. Some exceptions do occur for those working in the remaining very few occupations that pay reasonably in Podunk.

    In other words, even though it is oh-so-fashionable these days to scold people over these matters, their “choices” are mainly forced because so much employment (of the sort that pays much of anything, which excludes slinging hamburgers and the like) is available nowadays only in otherworldly-expensive locations.

    1. We have many choices to reduce transportation costs, given some motivation. I believe what you posted is common wisdom or may be better described as common fallacy. Read some of mrmoneymustache posts inwhich he hits this hard.

  3. The road tax will push high BTU fuel as the tax is attached to gallons. Better to have a BTU tax for accurate harm to environment and CO2 production. Diesel fuel would pay more tax for each gallon as the fuel is more harmful. Since heavy trucks use the fuel probably more appropriate for road wear/harm retrievable costs as well.

    Problem with fuel tax, is the electric vehicles gets away with using infrastructure scot-free. Also, those that own electric vehicles almost always have the most financial ability to pay such taxes. A BTU tax on energy consumption may be the best tax. Coal power is polluting and not so efficient even if powering battery cars.

    1. Oh, bye the way the toll approach to fairly charge for infrastructure cost is getting more viable given the technology to automatically and effortlessly make the payment.

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