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Bloomberg Editors Propose a 'Flexible' Federal Gas Tax

Bloomberg's editors ask rhetorically, with gas prices falling due to crashing oil prices, will the federal government raise the gas tax to fund badly needed road infrastructure? They suggest tying the gas tax to oil prices in reverse direction.
October 26, 2014, 7am PDT | Irvin Dawid
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"Raising the gas tax is bad politics -- and will remain so even after the November elections. But the economic case for a gas tax hike is compelling, and Congress should be paying attention," write the editors.

To remove some of the political sting involved, congressional leaders could peg an increased gas tax to the price of oil -- so that if oil prices rise again, the tax would come down, at least a little.

However, they don't spell out exactly how the gas tax would reverse direction with the price of oil. Wholesale gas taxes, which are paid by the gasoline distributor, not the motorist, do just the opposite: rise and fall with the price of oil.

Gasoline (or oil) price floors, "a point below which prices won’t fall," have been suggested by economists and even by auto dealers to maintain demand for fuel efficient vehicles in times of falling gas prices, which clearly applies today as University of Michigan's Michael Sivak recent research indicates.

In any case, they write that "the economic case for a gas tax hike is compelling, and Congress should be paying attention. For the moment, low oil prices are presenting an unexpected opportunity to quickly raise the money that U.S. highways need: Simply increase the federal gas tax."

They are joined by the editors of USA Today, who add a caveat: "(D)o it soon while the price of oil is so low that people would barely notice."

Finally, one more advocate for an oil price floor could be the domestic energy industry. As we noted recently, the falling global price of oil may be "fracking's most formidable foe."

[Hat tip to AASHTO Journal]

Full Story:
Published on Thursday, October 16, 2014 in Bloomberg View
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