Business, Highway Lobbies Fight Gas-Tax Holidays

Date: Wednesday, March 30, 2022
Source: The Wall Street Journal

WASHINGTON—Construction and business groups are trying to hold back a wave of state and federal gas-tax decreases that they say could jeopardize much-needed road and bridge improvements, including projects to be funded by last year’s $1 trillion bipartisan infrastructure law.

The U.S. Chamber of Commerce, in a letter sent to members of Congress on Monday and reviewed by The Wall Street Journal, said it would reward lawmakers who oppose a federal gas-tax holiday with higher ratings from the business lobby group.

The chamber spent 20 years lobbying for a federal infusion of infrastructure spending like what President Biden put into law in November. But with midterm congressional elections and state races this fall, politicians are eager to show voters they are taking action to relieve motorists.

“We’re concerned to see the benefits of the infrastructure law undermined almost immediately with a suspension of the federal gasoline tax,” said Trey McKenzie, the organization’s vice president of government affairs.

The chamber says businesses will be among the beneficiaries of improvements to the nation’s infrastructure, and that suspending gas taxes threatens the “user pays” model in which those who use transportation systems pay for them.

The American Road & Transportation Builders Association, a construction-industry trade group, is this week circulating on Capitol Hill a new study that contends gas-tax changes don’t always lead to savings for motorists.

Gas prices have hit highs this year amid supply shortages exacerbated by Russia’s invasion of Ukraine. Already, Connecticut, Maryland and Georgia have completed plans to temporarily halt gas taxes at the state level, and states including Virginia, Ohio and Florida are weighing gas-tax options.

In Washington, U.S. Senate Democrats have proposed legislation to stop collecting the federal gas tax of 18.4 cents a gallon through the end of the year.

“People are feeling a real pinch on everyday goods, and we must do more to help address rising costs, particularly the price of gas,” Sen. Maggie Hassan (D., N.H) said about the bill she co-sponsored with Sen. Mark Kelly (D., Ariz.) and five other Democrats. House Democrats have proposed a similar measure.

House Speaker Nancy Pelosi (D., Calif.) is soliciting lawmakers’ input on how to address rising gas prices through legislation, according to Democratic aides. She has brought up the idea in closed-door meetings with Democrats recently, and is looking at bills proposing a gas-tax holiday or rebate, or boosting the ethanol content in gasoline.

Ms. Hassan’s legislation calls for general funds to replace money the federal Highway Trust Fund loses during the tax holiday.

Dean Franks, senior vice president of congressional relations for the road-builders group, said the federal legislation is a gamble because it would be politically difficult to reinstate the gas tax if pump prices remain high next year. And if the holiday continues, he said, Congress might not continue propping up the Highway Trust Fund with general-fund money.

The gas-tax issue cuts across traditional partisan politics, with both Republicans and Democrats at the state level supporting various relief measures.

In the House and Senate, however, Republican leaders largely oppose suspending the federal gas tax. Senate Minority Leader Mitch McConnell of Kentucky has accused Democrats of playing “political games,” noting that the gas-tax relief would expire soon after midterm elections.

To nudge Democrats into their corner, the road-builders group has been paying for social media ads that invoke former President Barack Obama. As a candidate in 2008, Mr. Obama criticized his opponents for supporting a federal gas-tax holiday during the recession, which he called “a gimmick.”

Coalitions of construction and business interests and labor groups say gas-tax decreases don’t necessarily mean consumer relief since they won’t prevent retailers from raising base prices—and may encourage them to do so.

The road-builders group’s new study, reviewed by the Journal, examines the market impact of state gas-tax changes in 34 states between 2013 and last year.

“State gas-tax increases averaged 2.8 cents-per-gallon nationwide, but half a penny—0.5 cents—reached consumers at the pump,” according to the study.

New Jersey lowered its state gas tax by 8.3 cents a gallon from Oct. 1, but the study says the retail price of gasoline stayed unchanged for three consecutive days and then rose along with the price of crude oil.

State officials are forging ahead. Virginia Gov. Glenn Youngkin, a Republican, wants lawmakers to suspend the state fuel tax for a year when they meet next week for a special session on the budget. The Virginia tax rose by 5 cents a gallon in July, after 2020 legislation to increase it to help fund infrastructure projects.

“What we keep bringing state lawmakers back to is that the roads don’t fix themselves,” said Gordon Dixon, executive vice president of the Virginia Transportation Construction Alliance. “We understand the governor’s desire for consumer relief, but this is not the right avenue.”

The Virginia chapter of the National Federation of Independent Business supports Mr. Youngkin’s proposal, saying small-business owners need the help. At an Exxon station in Arlington on Monday, where gasoline was $4.62 a gallon, Uber driver Mitchell Gaye said elected officials must try to bring prices down.

“I’m driving all the time for work, and all I do is think about how much it’s costing me,” Mr. Gaye said while gassing up his 2022 Hyundai Tucson.

In Ohio, some Republican state lawmakers back a proposal to suspend for five years an increase in the state gas tax that was approved in July 2019 to help pay for transportation projects. They cite the federal infrastructure funding as a reason Ohio can stand to take in less money from the state gas tax.

“We’re getting way more money federally than we estimated we need,” said state Sen. Stephen Huffman, a Republican who sponsored the suspension bill. “A gas tax is a tax on the working class.”

Chris Runyan, president of the Ohio Contractors Association, is among those lobbying against suspending the gas tax, calling it a shortsighted approach. Most federal funding for infrastructure projects is awarded to a state only if the state also commits its own money. “So decreasing the money you have available at the state level because you have more federal money doesn’t really make a lot of sense,” he said.

[Read from the original source.]