Washington DC — A key Republican US congressman has unveiled a plan to partially fund a nationwide infrastructure program through increases in federal gasoline and diesel taxes, a proposal which could weigh on domestic demand.
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Register NowRepresentative Bill Shuster, a Pennsylvania Republican and chairman of the House Transportation and Infrastructure Committee, unveiled the plan late Monday. It calls for a 15 cents/gallon increase in the federal gasoline tax and a 20 cents/gallon increase in the diesel tax, phased in over three years.
After three years, increases in the gas and diesel tax would be indexed to inflation and by the end of fiscal 2028 the tax would be eliminated entirely, according to the proposal.
The federal gasoline tax has been 18.40 cents/gal since 1993 and is used to fund the National Highway Trust Fund. Shuster's plan, which has not been formally introduced, calls for a study which would replace the tax with a "per-mile user fee" to pay for the highway fund.
The federal gasoline tax has been criticized since it disproportionately impacts low income drivers, who may drive less fuel-efficient vehicles, and higher income drivers, who can afford hybrid and electric vehicles.
On Monday, Representative Carlos Curbelo, a Florida Republican, introduced a carbon-tax proposal which would repeal the federal gasoline tax. "Even if we did increase the gas tax we know it would only be a short-term solution," Curbelo said Monday.
In February, President Donald Trump endorsed increasing the gasoline tax by 25 cents/gal in order to offset some of the cost of a $1.5 trillion infrastructure plan.
Shuster's proposal also includes tax increases on so-called alternative transportation, including a 10% tax on the wholesale price of electric vehicle batteries, a 10% tax on bicycle tires, and reinstates a 4.3 cents/gallon tax of diesel used by passenger trains.
US motor gasoline demand is expected to average 9.31 million b/d this year, down about 10,000 b/d from last year, according to the US Energy Information Administration. Demand is expected to climb to 9.36 million b/d in 2019.
--Brian Scheid, brian.scheid@spglobal.com
--Edited by Maurice Geller, maurice.geller@spglobal.com