The Case for Taxing Oil Before It Reaches the Pump

The "Repeal and Rebuild Act” would create a per-barrel fee on oil headed to refineries, with a refund for non-automotive uses and diesel fuel. Although consumers would no longer pay directly, Rep. DeFazio's office says, this would preserve the "user pays" feature of the highway and transit program by continuing to collect based on fuel use.

"What if we got rid of the tax that people don’t like," Rep. De Fazio told The Oregonian newspaper, “and move it upstream to something that most people don’t like — the oil industry?"

A barrel tax of $6.75, combined with indexing the diesel tax to rise with inflation, would raise $314 billion over 10 years, Rep. DeFazio’s office says. The proposal includes repeal of the current truck tire excise tax. The barrel fee would rise over time, because it would be “double indexed” to match the growth of the U.S. DOT’s Highway Construction Cost Index and to replace revenue lost as CAFE standards require greater fuel efficiency. Together with indexing the diesel fuel tax, DeFazio’s proposal would raise $104 billion more over ten years than continuing the existing gas tax.