Trump’s Plan to Raise Federal Gas Tax is Not a Hit with his Economic Advisers

On Wednesday, Donald Trump, President of the United States of America, was warned that raising the tax on gasoline in order to pay for improvements to infrastructure was an ‘imperfect’ system. This input from Trump’s top economic advisers comes in the wake of Trump’s proposal to increase federal gas tax by 25 cents. These funds would then be used to fund the President’s infrastructure plan to maintain and improve the nation’s roadways.

Conservatives have been notably displeased with the idea as there are worries that it might counter the benefit from the tax cuts that were recently implemented by the GOP. This would put the Republican Party in a tough spot ahead of the midterm elections.

Furthermore, the Council of Economic Advisers has released a report addressing various concerns the team has regarding the use of taxes in order to pay for the nation’s roads. The chairman of the council, Kevin Hassett, spoke publicly to CNBC on Wednesday to confirm what the council means.

Hassett explained: "One of the things that we point out in the economic report to the president that came out today is that the gas tax's current design isn't really a 21st century design — that the gas tax was set at levels that were needed to fund highways back in the days when fuel economy was really low and we didn't have electric cars."

The current gas levy sits at 18.4 cents and has not been raised since 1993. Originally this tax was used to build and maintain highways and other transportation needs, but since 1993 inflation and rising fuel efficiency have eroded the purchasing power of these tax-acquired funds.

The report also explains that fuel taxes do not motivate people to use roads efficiently, not do they reflect costs connected with congestion. Indeed, driving 100 miles on a quiet country road or a busy city road in rush hour will drum up the same amount of tax revenue.

Furthermore, electric vehicles are too efficient and do not generate enough revenue from gas tax to make up for their wear and tear on the roads. If everyone drove a Tesla car, the gas tax would become completely irrelevant and would not be nearly enough to keep paying for the country’s roads.

On the other side of the spectrum, heavy trucks cause disproportionate road damage and do not pay enough fuel tax to offset this damage along with the emissions and congestion they cause.

As far as the council is concerned, paying for roads using tolls is a much more solid plan despite the higher administrative costs involved with collecting fees. This allows the government to charge people who actually use the roads and bridges that need maintaining.

The council also put forward other ideas such as charging heavy trucks in accordance with the distance they have travelled or charging low-occupancy vehicles a fee for the privilege of travelling in high-occupancy lanes.

Hassett said that right now the most important thing to do is pass an infrastructure bill but this cannot be done until it is decided how it will be funded. "Right now, the president says that we should put the options on the table and think about them."