Gas Tax And Mileage Tax Proposed To Solve The Highway Trust Fund Fiscal Cliff

Both a gas tax and a mileage tax are being proposed as solutions to the latest fiscal cliff faced by the federal government when the Highway Trust Fund runs out of money this summer. But would the average American be outraged at such a suggestion considering how high gas prices have risen during the last 10 years?

In a related report by The Inquisitr, United States oil production now beats even Saudi Arabia due to fracking operations. In fact, the growth rate in U.S. oil production outpaces the next nine fastest growing countries combined. Unfortunately, fracking has been linked to earthquakes in the American Midwest, so it’s possible that concern over that theory could affect oil prices in the future.

The Federal Highway Trust Fund was created 58 years ago to be used for paving roads, rebuilding bridges, and updating the transportation system. A federal gas tax is how the Highway Trust Fund receives money and the current rate of 18.4 cents per gallon was set 21 years ago. Unfortunately, federal and state spending on transportation related projects have increased by more than 70 percent since 1993, and the current gas tax cannot keep. By October 1, 2014 it’s expected to be completely out of money, and in the short term, this new fiscal cliff puts 700,000 jobs at risk while Congress decides how they will handle this latest financial crisis.

Both Republicans and Democrats are suggesting a new gas tax that would be adjusted over time based upon inflation, meaning that the gas tax would rise over the years. Others have suggested the federal gas tax should be eliminated entirely and that states should be responsible for maintaining their transportation systems instead of the federal government. Some states like Indiana already have plans for a gas tax that is collected from distributors instead of at the gas pump.

In general, the idea for a new gas tax is unpopular because of the looming 2014 mid-term elections. As such, Congress is also considering a six month temporary extension that would give money to the Highway Trust Fund from other sources. Iowa Gov. Terry Branstad does not like the idea but it’s better than putting construction projects on hold and sending workers home:

“It’s not what we’d like, but it’s better than nothing. Like Congress oftentimes has done, it will find some way to kind of kick the can down the road.”

But Oregon Rep. Earl Blumenauer is instead saying that the federal gas tax should be phased out in order to replaced by a mileage tax that is based upon how many miles a vehicle travels.

“America is literally falling apart. We are fast losing what used to be a competitive edge with superior infrastructure. The reliance on the fuel tax as … based on the volume of fuel consumed has locked the highway trust fund into a death spiral,” he said. “It is no longer a reflection of actual road use.”

Blumenauer introduced legislation that would increase the federal gas tax to 33.3 cents per gallon in order to solve the current crisis, but then would abolish the gas tax in 2025 in favor of the mileage tax. The Congressman claims this system would only track miles traveled, not actual locations, which he says should calm any fears over privacy. But one negative side effect is that owners of gas efficient vehicles would in effect be paying more under this new system when compared to a gas tax based upon the gallon.

Would you prefer a higher gas tax or a mileage tax to resolve the Highway Trust Fund fiscal cliff? Or do you think there’s another, better solution?