As an estimated 50 million Americans plan to travel for Thanksgiving holiday celebrations, politicians across the U.S. and Europe have introduced legislation to increase the gasoline tax. Legislators should listen to an outspoken foe of those taxes: Sen. Bernie Sanders.
Gasoline tax revenues, which fell consistently before the COVID-19 pandemic, have gone into a free fall under government-mandated lockdowns. In the U.S., the gasoline tax funds the Highway Trust Fund, which pays for improvements to roads and bridges. But the fund has run a $16 billion deficit, and the lower rate of travel due to the coronavirus will create an additional $50 billion deficit by next November, according to the American Association of State Highway and Transportation Officials.
Politicians created a problem, and now they want to punish citizens for following their orders. They now propose to solve the crisis which they created the only way they know how: raising taxes.
Last Tuesday, Chicago hiked its citywide gasoline tax by 60%, from 5 cents a gallon to 8 cents a gallon. Two days later, the Wyoming legislature’s Joint Revenue Interim Committee approved a 9-cent fuel tax increase. Louisiana State Rep. Jack McFarland has agreed to introduce a measure that would more than double the state gasoline tax, raising the state’s levy by 22 cents a gallon – 10 cents all at once, then two cents a year each year until 2033.
The idea holds sway on both sides of the Atlantic. Officials in the European Union wish to impose a unified fuel tax across all 27 remaining members “to make sure that our carbon footprint is fully reflected in our taxes.” Setting fuel tax rates “is very often [the responsibility of] national policy,” said European Commission Executive Vice-President Frans Timmermans this month. “But if you want to be consistent on this … you will have to think about changing the tax system.” In the UK, which just exited the EU, Chancellor Rishi Sunak considered a 5-cent-a-litre increase to fuel taxes, although sources at 10 Downing Street reported in September that Prime Minister Boris Johnson intended to block any fuel duty rise. (Sunak is now contemplating other punishing transportation duties.)
Meanwhile in Washington, Joe Biden – who shares none of Johnson’s pro-market instincts – plans a bevy of proposals that would increase gasoline costs indirectly. “Traditionally, presidents had limited ability to move the needle at the gas pump, but in recent years that has changed,” said Patrick De Haan of GasBuddy, which recently analyzed 2020 campaign proposals’ impact on gasoline prices. Biden’s plan proposes “curbing U.S. oil production and end[ing] fracking, which could potentially send oil prices and thus gas prices higher.”
Biden’s advisers look at gasoline taxes as a way to discourage fossil fuel consumption and fund government programs. However, as gasoline costs rise and CAFE standards increase fuel efficiency, consumers buy less gasoline – and pay less tax. Politicians, who have grown accustomed to the revenue, now hike taxes. Gasoline taxes are a prime example of how governments levy “sin taxes” and then become financially dependent on the “sin.” Their taxes fall hardest on the poor and struggling.
Politicians along the political spectrum, in both parties, and across the transatlantic sphere could stand to listen to the anti-tax message of perhaps the world’s most prominent democratic socialist, Sen. Bernie Sanders.
“The gasoline tax is one of the most regressive and unfair taxes imaginable,” Sanders said in a typically impassioned speech before the House of Representatives in August 1991. The Vermont independent was serving his first term in Congress at the time.
While social engineers tinker with tax codes from on high, fueled by an endless stream of tax revenues expropriated from the productive economy, the poorest Americans find themselves and their families squeezed to pay the price. Richard Thaler, the co-author of Nudge, won the Nobel Prize for his contributions to behavioral economics. However, his proposed fuel tax increases forced struggling British citizens to sleep in parking lots, away from their families, because they could not afford the fuel to travel home every night.
Bernie Sanders, who is generally averse to trade, rightly rejected importing this idea.
Unfortunately, he couched his opposition in terms of class warfare rather than economic principle. And two years after giving that speech, Sanders voted to raise the gasoline tax. Sanders voted for President Bill Clinton’s Omnibus Budget Reconciliation Act of 1993, which raised federal gasoline tax to 18.3 cents per gallon, and diesel tax to 24.3 cents a gallon. Nonetheless, when he’s right, he’s right.
At a minimum, “pro-market” conservatives may want to rethink their support of a tax hike opposed even by Bernie Sanders.
Bernie Sanders’ full speech is reproduced from the Congressional Record for August 2, 1991, page 22442:
A MOST REGRESSIVE AND UNFAIR TAX
(Mr. SANDERS asked and was given permission to address the House for 1 minute.)
Mr. SANDERS. Mr. Speaker, this Congressman is strongly in favor of Federal action which will pump billions of dollars into rebuilding this Nation’s deteriorating infrastructure—our roads, our bridges, our mass transit systems, and other transportation needs. I am not, however, in favor of raising the gasoline tax 5 cents per gallon in order to finance these projects—as current legislation proposes.
The gasoline tax is one of the most regressive and unfair taxes imaginable. Clearly, this tax will come down heavily on working people, like the workers in a rural State like Vermont, who often have to travel long distances in order to get to work. Raising the gas tax last year by a nickel per gallon was wrong, and raising it another 5 cents per gallon this year is even more wrong.
Mr. Speaker, the wealthiest people in our country have grown much wealthier during the last decade, yet at the same time they have seen a significant decline in their tax burden. The working people and the middle class have grown poorer, but they have seen an increase in their tax burden.
Let us say no to the 5-cent gas tax and return, after the recess, with a new revenue raising proposal which will be fair and progressive—not another tax on working people.