The Gas Tax: A Trip Back in Legislative Time …

As Tax Day prompts a rush of political rallies and media coverage, it’s worth looking back at the history of the federal levy that helps pay for transportation projects: the gas tax.

jesse_0704.jpgThe late Sen. Jesse Helms (R-NC) in 1982, when he battled his own party’s attempts to raise the gas tax. (Photo: TIME)

Most Americans who follow infrastructure can cite the year of the last federal gas-tax increase (1993) off the top of their heads, but how did the tax grow to its current, non-inflation-adjusted level of 18.3 cents per gallon? A helpful table from the Tax Foundation tells the story.

The two most recent gas-tax hikes came in 1993 (a 4.3-cent per gallon increase) and 1990 (a nickel per gallon increase). Congress approved both hikes using "reconciliation," the filibuster-proof legislative tactic that became something of a household name this year when Democrats used it to pass their health care bill.

The gas tax was also raised in 1982 by then-President Reagan, a fact cited often by House transportation committee chairman Jim Oberstar (D-MN) and others who seek to puncture the current bipartisan resistance to increasing fuel levies. Reagan had vowed just months before pursuing the tax increase that gasoline fees would not rise "unless there’s a palace coup and I’m overtaken or overthrown," but it didn’t take long for him to change his mind, as the Tax Analysts newsletter reported:

Despite the absence of a coup, Reagan acknowledged two weeks later that a gas "user fee" was under discussion. And two weeks after that he announced his plan to ask the lame-duck
Congress to increase the gas tax and earmark the funds for highways,
bridges, and mass transit.

Support in Congress was strong and bipartisan.

When the gas-tax increases passed during the Reagan, Clinton, and first Bush administrations are compared with the current Congress’ predicament, two interesting patterns emerge.

The first: All three hikes approved in the past 30 years had to be steered past Senate GOP filibusters or Democratic challenges. In 1993, then-Vice President Al Gore had to cast the deciding Senate vote on raising gas taxes. In 1990, as Tax Analysts notes, Sens. Max Baucus (D-MT) — now chairman of the influential Finance Committee — and Kent Conrad (D-ND) both took aim at the proposed tax increase. And in 1982, then-Sen. Jesse Helms (R-NC) led a conservative rebellion against a gas-tax increase backed by Reagan as well as less anti-tax GOP leaders.

The second: All three hikes were approved separately from the six-year federal transportation legislation that sets national policy for roads, bridges, transit, and bike-ped infrastructure. The situation faced by lawmakers this year, in which a gas-tax increase is necessary to generate sufficient financing for a long-term federal bill, is to a certain degree unprecedented.

  • Larry Littlefield

    Using the BLS inflation calculator, the 1 cent tax in 1932 is equivalent to 16 cents in today’s dollars, or slightly lower than the actual current tax.

    Whereas the 3 cent tax in 1956 is equivalent to 24 cents today.

    Which just goes to show that the Republican policies of recent years have been closer to Herbert Hoover than Dwight Eisenhower. The economic consequences as well.

    Although to be fair to Hoover, he didn’t bankrupt the country; all the damage back then was on the private sector side.

  • Jsd

    “Support in Congress was strong and bipartisan.”

    How quaint.

  • The Federal Excise Tax on Gasoline and the Highway Trust Fund: A Short History from the Congressional Research Service provides more background on the excise tax and its history

  • Moser

    I suspect Tip O’Neill had a lot more to do with the 1982 hike than Reagan did.

  • Jeffrey W. Baker

    LL: Better to index the gas tax to the price of gasoline rather than the generic basket of goods. Fact is that today’s gas tax is incredibly low vs. the price of the product. Iran is capturing all of the recent increase in oil prices and the govt is watching it all pass by.

    Since 1994 the price of gas has tripled while the tax on gas has stayed flat.

  • Mad Park

    Always nice to be reminded of Jesse Helms, especially on Tax Day when the TeaBaggers are out in force – he was 50 years ahead of those troglodytes!

  • pothole

    Raising the gas tax makes all the sense in the world. It’s a user fee (or as close as a tax can come), an increase will help manage demand, and the country’s infrastructure needs more money. Congress should have raised the tax a year ago when gas prices were extremely low. With gas over $3 a gallon in Chicago, Congress will be paralyzed until the lame-duck session.

  • B. Marshall

    GWB could have gotten a $2/gallon Freedom Tax through after 9/11. That would have at least covered the cost of invading places.

  • Larry: well, other taxes have gone up by an order of magnitude since the 1930s in real terms, together with income.

    The issue here is that government purchases track percentage of GDP more than inflation, because they’re mostly on labor-intensive goods, whose cost rises linearly with wages. Infrastructure, health, and education are labor-intensive; welfare and social security go to labor-intensive staple items like food and housing. The military needs to be stronger than enemy forces, which means it gets money in proportion to GDP, again.

  • Having worked in an Army job where I had to think about these things and then in a state DOT during the 1973-74 energy crisis, I can comment that gas taxes should best be linked to gas prices, if the goal is to defend the country and to keep building and maintaining highways.

    Using a sales tax style percentage puts an added brake on demand run-ups that threaten our security.

    Operating and construction costs for highways are strongly linked to fuel and asphalt petroleum costs, not to GDP or the CPI.

    While this takes even more money out of the rest of the economy until people adjust their fuel consumption one way or another, it would keep putting it back into sectors that we’re now financing out of long-term borrowing and deficits.



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