Gas tax increase or budget gimmick?

On page 188 of the President’s budget, in Table S-8, we see a section titled “Reauthorize Surface Transportation.”  That section includes $235 B of spending over the next decade.  It also includes a line labeled “Bipartisan financing for Transportation Trust Fund,” and shows a ten-year total deficit effect of –$328 B.

Because of this enormous “Bipartisan financing for Transportation Trust Fund” policy proposal that would reduce the budget deficit, the President’s budget is able to show increased spending for roads, bridges, trains, and airports, yet also reduce the deficit.

What, then, is the President’s proposed “Bipartisan financing for Transportation Trust Fund” proposal?

CBO apparently figured out that the deficit reduction consisted of higher revenues, but the Administration did not provide any more detail. So CBO didn’t give them credit for the –$328 B.

CBO: However, in the case of a proposal to raise new revenues to support the reauthorization of surface transportation programs, the absence of any information about the nature of the taxes or fees that might be used to produce revenues did not allow an assessment of the potential budgetary effects. As a result, CBO did not include any revenues for that proposal, which the Administration projected would raise revenues by $328 billion over the 2012–2021 period. (p. 7)

This language from CBO shows that OMB did not provide any additional back-channel information on this proposal.  There’s no there there.

$328 B is a lot of money.  You may think you know what this line refers to: a gas tax increase.  That’s what I thought. As a rough rule of thumb, the government would raise about $1B per year for each penny per gallon increase in the tax on gasoline and diesel fuel.  If we match the numbers in the OMB table, it looks like about +20 +25 cents per gallon in 2012, growing to maybe +35-40 +34 cents by 2021. That’s roughly equivalent to a 25 cent per gallon increase, indexed to inflation.  (hat tip: Marc Goldwein of the Committee for a Reponsible Federal Budget)

A gas tax fits conceptually with increased transportation infrastructure.  There are occasional hints of bipartisan support for higher gas taxes to pay for more infrastructure spending (from Republicans who like to build highways). Higher gas taxes seem consistent with the President’s other policy goals, like reducing greenhouse gas emissions.  And the numbers match with commonly discussed proposals for a gas tax increase.

Update:  Expert friends have pointed out that other parts of the budget show a $438 B decline in “excise taxes.”  A gas tax is an excise tax.  There’s a scoring convention that if you cut gross gas tax revenues by $1, demand for gasoline will increase and recoup 25 cents of that lost revenue.  Applying a 25% “offset” to this $438 B gross revenue loss produces the $328 B net tax loss shown for the mysterious “financing for Transportation Trust Fund” proposal.  This is further evidence that the numbers represent a gas tax increase.  It also changes the back-of-the-envelope calculation I did above.  Looks like they’re starting out around +25 cents per gallon in 2012.

Yet in both their conversations with CBO (I infer from the text above), and in briefings of Congressional staff (I know from friends), Administration officials were explicit: this line does not represent higher gas taxes.

I can’t come up with any policy other than a gas tax increase that might raise that much money and be described as “Bipartisan financing for Transportation Trust Fund.”

There is only one policy that fits that description.  It fits perfectly with the text, the numbers, the political context, and makes policy sense given this President’s policy preferences.  And yet the President’s team explicitly reject that policy.

The President’s team is trying to have it both ways: spend money on infrastructure and claim deficit reduction, but don’t take the political hit for proposing a big gas tax increase.  CBO has called them on it and is not giving them credit for the $328 B of claimed deficit reduction.  That’s a big deal.

Suggested questions for White House Press Secretary Jay Carney:

  • Is the President’s “Bipartisan financing for Transportation Trust Fund” proposal a gas tax increase?
  • If not, can you describe any other “transportation financing policy,” bipartisan or not, that would raise $328 B over ten years as shown in the President’s budget?  If the President wasn’t proposing a gas tax, what else could he have meant?
  • If the President did not intend a gas tax increase, how did you come up with those specific year-by-year numbers in the budget?  Why $328 B rather than $300 B or $350 B?
  • Is this budget proposal a gas tax increase or a budget gimmick?

(photo credit: Charlie Ambler)

By | 2017-05-23T19:06:19+00:00 Sunday, 20 March 2011|