The Latest Plan to Siphon Money from Your Wallet

Are you paying too much for gasoline? You could soon pay more.

That is, if Congress bites on President’s Trump latest idea: Raise the gasoline tax. By 25 cents a gallon.

Which means, if you’re filling up the family van, that’s an extra $4.75 at the pump. Every time you fill up.

Now, President Trump isn’t proposing raising taxes just for fun. It’s not like he likes taxes. The money is badly needed for repairs and upgrades to America’s bridges and roads. And it has to come from somewhere.

In a closed-door meeting on infrastructure with both Democrats and Republicans, Trump offered the idea of a 25-cent hike in the gas tax. He’d raise the tax on diesel by the same amount.

The U.S. federal excise tax on gasoline is 18.4 cents per gallon. It last went up in 1993, and inflation has increased 64.6% since then. So, some will say we’re due. That, in real terms, the gasoline tax is actually far less than it was in 1993.

Certainly, Congress thinks so. Gasoline taxes provide revenues that fund the Highway Trust Fund. These, in turn, pay for the lion’s share of federal spending on highways and mass transit.

Taxes have fallen short of expenditures for fixing the nation’s roads for years. Since 2008, Congress has buttressed the trust fund with $143 billion in general revenue.

The U.S. Chamber says the proposal would raise $394 billion, which is more than enough to pay for Trump’s infrastructure plan. That plan has a headline price tag of $200 billion. We can argue about what it will actually cost, and the proof is in the pudding of the written law.

The Chamber of Commerce thinks a higher gasoline tax is a good idea. You know who hates it? The Koch brothers; powerful king-makers in the Republican Party.

So, who will win? The Kochs or the Chamber of Commerce? They say money talks in American elections.

Who Pays?

One downside to consider is who will end up footing the bill. Strategas Research points out that the higher tax, along with expected increases in fuel costs, would siphon about $71 billion from consumers’ wallets.

That’s about 60% of the expected $120 billion gain from Trump’s tax cuts.

And the tax cuts are unevenly distributed, anyway. Most of the cuts go to higher-income individuals.

Gasoline prices are already creeping up. On average, gasoline is up about 20 cents per gallon so far this year. That costs consumers about $34 billion.

So, let’s say gasoline prices don’t go up another cent. The combination of new taxes and an existing price rise for gas would cost American consumers about $71.6 billion a year. Ouch!

Things Could Be Worse

The tax could be higher. President Trump originally suggested that we hike the gasoline tax by 50 cents a gallon. That was in a meeting with lawmakers last year. He later backpedaled on that one.

One thing President Trump might want to consider is that gasoline taxes can be very unpopular. Turning to Strategas Research again, the firm published a chart of the negative correlation of a president’s approval rating and rising gasoline prices …

That’s why they call higher taxes the “third rail” of American politics. Or to put it another way, higher taxes are a signpost on the road to getting booted out of office.

On the other hand, President Trump is bulletproof when it comes to things that would take down another politician. Maybe he can shake off the bad effects of hiking the gasoline tax, too.

Transportation Secretary Elaine Chao says “everything is on the table.” That might include higher gasoline taxes. So, enjoy carefree driving while you can. The prices at the pump may be about to shift higher.

All the best,
Sean Brodrick

About the Editor

Supercycles aren't daily occurrences. They happen in stages and can last for years. Sean Brodrick identifies them early and mines for the most financially sound stocks within them. And he taps into the powerful Weiss Ratings, along with our proprietary AI Performance Booster, to help him do it!

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