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Gas Tax Holiday Idea Goes Nowhere

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The Associated Press

Published: July 20, 2008

WASHINGTON - The political vision of a summer gas tax holiday died a quick death in Congress, losing to a view that federal excise taxes on gasoline and diesel fuel will have to go up if they go anywhere.

Despite calls from the presidential campaigns for a Memorial Day-to-Labor Day tax freeze, lawmakers quickly concluded - with a prod from the construction industry - that having $9 billion less to spend on highways could create a pre-election specter of thousands of lost jobs.

Now, lawmakers quietly are talking about raising fuel taxes by a dime from the current 18.4 cents a gallon on gasoline and 24.3 cents on diesel fuel.

With gas prices setting records daily, Republican presidential hopeful Sen. John McCain of Arizona and former Democratic candidate Sen. Hillary Rodham Clinton of New York called for a 90-day suspension of the federal fuel tax to give drivers a little relief at the pump. The fuel taxes go into the Highway Trust Fund, which is used for road construction and repair and mass transit.

Clinton suggested making up for the loss by imposing a windfall profit tax on oil companies, an idea that Republicans rejected. McCain said the money could come out of the general Treasury fund, in effect adding to the federal deficit, and is still getting mileage from the idea.

"Some economists don't think much of my gas tax holiday," he said in a speech this month. "But the American people like it, and so do small-business owners."

Sen. Barack Obama of Illinois, the likely Democratic nominee, opposed the idea from the beginning and the White House gave it a cold shoulder. Depriving the 52-year-old Highway Trust Fund of $9 billion at a time when it is heading into the red doomed the notion of a gas tax holiday in Congress.

The chairman of the House Transportation and Infrastructure Committee, Rep. James Oberstar, D-Minn., and the chairman of the highway subcommittee, Rep. Peter DeFazio, D-Ore., presented fellow lawmakers with a list of how many jobs and how much money each state would lose. It ranged from $30 million and 1,000 jobs in Vermont to $664 million and 23,000 jobs in California.

"Because the trust fund is already looking at a looming shortfall, it would have moved project cancellations into the construction season," DeFazio said, adding it was "highly unlikely" that oil companies would have passed savings along to consumers.

Just three years ago, that trust fund enjoyed a surplus of $10 billion. Even without a tax freeze, the fund is projected to finish 2009 with a deficit of $3 billion. That could grow as Americans drive less and buy less gas because of higher pump prices.

For many, the solution is to raise rather than suspend or cut federal fuel taxes, which haven't changed since 1993.

LOSSES AVERTED

The American Road & Transportation Builders Association projected the amount of federal highway funds, in millions of dollars, that states would lose and highway-related job losses from a 90-day suspension of federal gasoline and diesel fuel taxes. Highway money is based on the formula used for distributing money from the Highway Trust Fund to states, and job losses are spread over three to four years. Here are some southern states, as well as the states losing the most and least money:

Florida - $361 million and 12,569 jobs

Georgia - $261 million and 9,078 jobs

Louisiana - $115 million and 4,011 jobs

Mississippi - $85 million and 2,952 jobs

California - $664 million and 23,107 jobs

Delaware - $28 million and 980 jobs

Source: The Associated Press

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