Kerry on Senate Climate Bill: Federal Gas Tax is Staying at 18.4 Cents

The several dozen transportation industry groups that raised questions about where the upcoming Senate climate change bill would send proceeds from its new "linked fee" on carbon fuels can stop worrying — because it looks like the legislation won’t contain any new tax on motor fuels.

Sen_John_Kerry_Discusses_Partnership_China_NaObORtZBHul.jpgSen. John Kerry (D-MA) (Photo: Getty)

As Sen. John Kerry (MA), the climate bill’s chief Democratic author, told Reuters late yesterday:

"There is not even a linked fee. There’s not a tax, there’s nothing similar."

Pressed
for clarification about the fee, Kerry then said, "certainly not the
way it was described previously, nothing like that." The Massachusetts
Democrat refused to elaborate.

Kerry was more direct in a response to the Houston Chronicle, stating: “The gas tax is 18.4 cents today, and it’ll be that when this bill is passed.”  

His comments do not rule out the possibility of some charge on carbon-based fuels remaining in the bill, but they cast significant doubt on the scenario that Washington transportation watchers had feared most: extra fees that oil companies would pass on through higher costs at the pump, amounting to a de facto gas tax hike without guaranteed revenue for road and transit projects.

The oil and gas industry had responded favorably to the prospect of a predictable fee they could market as a response to climate change, effectively shifting any negative consumer response onto Congress rather than fuel producers. American Petroleum Institute President Jack Gerard predicted last month that a carbon charge would "soften the reaction" among his member firms to a national cap on greenhouse gases.

The challenge of addressing transportation emissions, which account for about one-third of the nation’s total output, could end up pushing the release of the Senate climate bill beyond its original Monday deadline. Sen. Lindsey Graham (SC), the measure’s sole GOP backer so far, told CongressDaily that Monday remains "the hope" but is not set in stone.

  • “the scenario that Washington transportation watchers had feared most: extra fees that oil companies would pass on through higher costs at the pump, amounting to a de facto gas tax hike without guaranteed revenue for road and transit projects.”

    Is that a terrible scenario? I would like to see higher taxes on gasoline – high enough to reflect all the environmental costs of driving – that are passed through as higher costs at the pump. There is no reason for them to be dedicated to promoting transportation – any more than sales taxes that you pay when you buy books are dedicated to promoting books.

    We already spend far too much on transportation. Today, about 20% of consumer spending goes to transportation. In 1900, when incomes were much, much lower, only about 2 percent of consumer spending went to transportation.

    The premise of the highway trust fund was that gas tax revenues should be used to build more roads to generate more gasoline sales and gas tax revenues in an endless vicious circle. That is why we spend so much on transportation today.

    Should we keep this model forever?

    I realize that we need to spend much more on transit now, to transition from our current auto-oriented cities to transit-oriented cities. But we should beware of the highway trust fund model, and our ultimate goal should be less money spent on transportation, not more.

  • peternatural

    Motorists in the U.S.A. are entitled to their massive subsidies, apparently.

    with any luck, the upward trend in gas prices will continue with or without a gas tax increase.

  • braxton

    Siegel-
    Your views are naive. Transportation spending in this country is far too low, and does not keep pace with our considerable needs. As a percentage of GDP, US spends far less than most developing countries, and is falling far behind places like China, India and even South America. For us to remain a competitive economy, we need to drastically improve our transportation infrastructure. And as far as your 2% consumer spending in 1900, sure. Of course, there were no cars back then (except for a very few wealthy individuals), the overwhelming majority of people could walk to work, and most consumer goods were produced and consumed locally. Hardly a fair comparison.

  • J:Lai

    braxton, I agree with your assertion that the US should be investing in transport infrastructure.

    However, comparing the level of spending in the US to developing counries like China and India is misleading. These are countries that are building infrastructure to accomodate rapidly expanding economies. The US, in contrast, has a fairly stable economy and allready has a high level of transportation infrastructure per capita (compared to developing countries.)

    For rapidly growing countries, there is a need to build more of everything, and quickly.

    For a wealthy, developed country like the US, it becomes much more important to decide how to allocate investment, for example between personal car infrastructure and public transit.

  • J:Lai

    Also, I don’t think that it is necessarily good to dedicate tax revenue to specific uses. It does tend to create situations where of over (or under)-investment in particular types of infrastructure at the expense of others since revenue cannot be re-allocated between them.

    It can also create perverse incentives to encourage behavior that produces revenue through government policy, beyond the natural level of demand.

    At the local level of municpal government, and maybe at the state level, I can see advantages to creating dedicated revenue streams that would outweigh the loss in flexibility. However, at the federal level I don’t think it is wise.

  • Brandi

    Disappointing news. The gas tax needs to be increased to discourage driving. The money really needs to be diverted to clean transportation.

  • Niccolo Machiavelli

    I think you all are missing the economic determinist populism that drives Mr. Kerry’s position. Everyone knows that Massachusetts is a big producer of oil and therefor benefits from lots of other states spending lots on oil. Taxing oil to pay for mass transit only benefits states like Oklahoma, Arizona and Alaska, part of the Democratic Party base. Mr. Kerry really wants more Federal money to flow to the oil producing states like Massachusetts, New York, New Hampshire and Connecticut. Wasting money on taxing oil and fuel will only drive jobs to OK, TX, AR and AK where they have such strong mass transit system. Up here in the Northeast we mostly live in trailer courts and depend on low gas taxes so we pump a lot of oil to drive our economy. We tax it at the well head. In Oklahoma they have road pricing and that really hurts us up here in the Northeast.

  • Alex

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