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Trump Floats 25-CPG Gas-Tax Increase

Added cost would blunt the benefits of recent tax cuts, analysis finds

WASHINGTON -- A 25-cent-per-gallon (CPG) increase in the federal gasoline tax, which President Donald Trump reportedly has endorsed to help fund his infrastructure proposal, would have a weighty effect on consumers’ pocketbooks, according to a new analysis.

On Feb. 14, sources told Axios that the president endorsed a 25-CPG increase to the federal gas tax, which has sat at 18.4 CPG since 1993, during a meeting with senior administration officials and legislators. A day later, Sen. Tom Carper (D), an attendee of the meeting, confirmed the reports.

“To my surprise, President Trump today in our meeting offered his support for raising the gas and diesel tax by 25 cents a gallon and dedicating that money to improve our roads, highways and bridges,” Carper said in a statement. “The president even offered to help provide the leadership necessary so that we could do something that has proven difficult in the past.”

The White House has not confirmed Trump’s endorsement of a gas-tax increase, with an official telling Reuters that the president “has said everything is on the table” to help improve the nation’s infrastructure. “The gas tax has its pros and cons, and that’s why the president is leading a thoughtful discussion on the right way to solve our nation’s infrastructure problems.”

This past week, Transportation Secretary Elaine Chao also told reporters that “everything is on the table,” including a gas-tax increase, to help support infrastructure repairs. She was responding to questions about the U.S. Chamber of Commerce’s recent proposal to raise the gasoline tax by 25 CPG over five years, which would raise $394 billion over 10 years.

Tax-Cut Benefits at Risk

Reaction from legislators to a gas-tax increase is mixed. Some legislators have said they would be more willing to support an increase if Trump provided “cover” to what is considered a politically unpopular idea. Another attendee of the White House meeting, Republican Sen. John Barrasso, told Reuters he does not support the idea.

One reason it would be unlikely to gain support from many Republicans is that a 25-CPG increase to the gas tax could blunt the effect of the recent tax cuts. A new analysis by Strategas Research found that the increase would eliminate 60% of the tax cuts’ benefits for individuals, according to CNBC.

Daniel Clifton, head of policy research for Washington, D.C.-based Strategas, said in a research note that the resulting increase in gas prices would also be nine times larger than the estimated $4 billion that employers are expected to pass on to workers from the corporate tax cut. In his note, Clifton pointed to a 20-CPG increase in gas prices in 2018 vs. this same period a year ago, which has increased consumers’ fuel costs by $34 billion.

"The proposed gasoline tax increase adds another 25 cents per gallon,” Clifton wrote in the note. “The combined 45 cents per [gallon] increase in gasoline prices eats away $71.6 billion from the $120 billion in individual tax cuts, or 60% of the net tax savings for consumers.”

With a 25-CPG tax increase, a 12-gallon fill-up would cost $3 more.

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