Opinion: Flawed criticism of gas tax break

The Hill
March 2, 2022

By Frank Knapp Jr., Opinion Contributor

Inflation is top of mind for Americans. The everyday-consumer prices are driving the public’s ill feelings about the economy with the cost of gas being a principal concern and financial burden.

So, it is understandable that elected officials look for some fast, if only small, relief on gas prices to help their constituents.

Yet, when politicians on both sides of the aisle recently proposed temporarily halting the federal or state gas tax through the end of the year to give consumers just a little relief, the nation’s elite on the left, middle and right went apoplectic.

Critics of such a proposal have derided it as panderingfeel-good do-ittle, a gimmickmisguided, and a short-term band-aid.

However, it is the criticism that suspending the gas tax is “fundamentally flawed” that can be used to critique the arguments against temporarily ending the gas tax.

The gas tax is insignificant 

One critic says that 18.4-cent-per-gallon federal gas tax won’t “change your life.”

But we’re not looking for life changing.  We’re looking to lower costs for middle- and lower- income Americans and small business owners.  These people, who need some relief the most, can multiply 18.4 cents times the number of gallons of gas they use a week and then multiply by four. They understand that every dollar they save each month on gas will be used for food, utilities, and other living and business expenses that have also risen.

No guarantee gas prices will come down 

Critics claim that consumers won’t see some or possibly any of the benefits from a gas tax suspension. They warn that the oil producers will use the tax elimination as an opportunity to keep prices the same giving them bigger profits.

Clearly gas prices fluctuate every day and consumers have no idea why.  The argument that nothing can be done to prevent gas customers from being abused by oil companies ignores the ability of regulatory and legislative measures that can and should be used to protect consumers.

Revenue for roads, bridges, and transit systems will be lost 

The federal gas tax will bring in an estimated $20 billion or more to the Highway Trust Fund through the end of 2022. These funds are used to repair and build the critical transportation infrastructure we all use.  Critics bemoan the loss of funds for these projects if the gas tax is temporarily not collected.

However, the gas-tax suspension proponents understand that the Highway Trust Fund must not be deprived. They propose that the lost gas tax revenue be replaced with general revenue funds.

But there is a better solution. In 2017, corporations had their federal tax rate permanently reduced from 35 percent to 21 percent. It is well documented that this 40 percent tax rate cut was not used to invest in their businesses and workers as promised. Instead, corporations used it for buying back their stocks to benefit shareholders and by giving it to their executives.  The lost Highway Trust Fund revenue should be replaced by a temporary increase in the corporate tax rate of a percentage or two. This would have the added benefit of removing some of the tax advantages big businesses now have on small businesses.

Lower gas prices will decrease interest in fuel-efficient vehicles 

Critics of suspending the gas tax until the end of the year argue that cheaper gas will remove the incentive to purchase more efficient vehicles, a national goal. Obviously, this criticism is counter to the above suggestion that the gas tax suspension will result in insignificant or no savings.

A break from the gas tax will yield some savings at the pump if government action is taken to guarantee that consumers will be the beneficiaries. But gas prices will continue to rise for the foreseeable future. The incentive for driving a more energy efficient vehicle is hardly going away.

All the criticisms of the gas tax suspension proposal are flawed. The effort is not meant to be the total answer to high gas prices. But it can be a small part of the effort that we should expect our elected officials to support.

Frank Knapp is co-chair of Small Business for America’s Future and president/CEO of the South Carolina Small Business Chamber of Commerce.



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