July 23, 2008

Potential for reduced highway funding scuttles summer gas-tax holiday

WASHINGTON

The political vision of a summer gas-tax holiday died a quick death in Congress, losing to a view that federal excise taxes on gasoline and diesel fuel will have to go up if they go anywhere.

Despite calls from the presidential campaign trail for a Memorial Day-to-Labour Day tax freeze, lawmakers quickly concluded — with a prod from the construction industry — that having $9 billion less to spend on highways could create a pre-election spectre of thousands of lost jobs.

Now, lawmakers quietly are talking about raising fuel taxes by a dime from the current 18.4 cents a gallon on gasoline and 24.3 cents on diesel fuel.

With gas prices setting records daily, Republican presidential hopeful John McCain and former Democratic candidate Hillary Rodham Clinton called for a 90-day suspension of the federal fuel tax to give drivers a little relief at the pump.

The fuel taxes go into the Highway Trust Fund, which is used for road construction and repair and mass transit.

Clinton suggested making up for the loss by imposing a windfall profit tax on oil companies, an idea that Republicans rejected.

McCain said the money could come out of the general Treasury fund, in effect adding to the federal deficit, and is still getting mileage from the idea.

“Some economists don’t think much of my gas tax holiday,” he said in a speech this month.

“But the American people like it, and so do small business owners.”

Associated Press

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