OMB's Donovan: Obama Open to Gas Tax Increase

OMB's Donovan: Obama Open to Gas Tax Increase
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President Obama would work with Congress to raise the federal gas tax to help pay for road and transportation improvements, even though he presented lawmakers with an alternative funding proposal this week, his budget director said Thursday.

Office of Management and Budget Director Shaun Donovan said Obama crafted an alternative six-year infrastructure plan because “it just has not seemed like there’s an ability politically to get any consensus around the gas tax. … We’re not going to take anything off the table, but also we’re open to a range of solutions, and hope we get into serious discussions about that.”

Donovan’s comments suggested that if Obama’s pitch to tax overseas corporate profits as an infrastructure revenue stream is not politically viable with lawmakers, the president still sees potential in the embattled gas tax, which has not increased in two decades.

Because of recently falling gasoline prices and ever-tightening state budgets, some legislatures with prominent GOP leadership are contemplating taxes at the pump to cover budget shortfalls and pay for road and bridge restorations. For example, Iowa is considering a 10-cent per gallon tax on gasoline and diesel fuel.

Sixteen states and Puerto Rico currently tax gasoline sales, according to the National Conference of State Legislatures. Many states dedicate at least a portion of those levies to transportation needs.

While many conservatives in Congress oppose raising taxes for any purpose, gasoline levies remain familiar to consumers, are embedded in per-gallon pump prices, and are simple to collect. The linkage between the taxes motorists pay on fuel, and the benefits of safe roads and bridges and reductions in carbon pollution are long established.

Obama’s budget proposal, a one-time, 14 percent tax on overseas corporate profits to cover infrastructure needs, has a less intuitive linkage and faces its own headwinds on Capitol Hill. While some prominent Republicans have backed the concept of taxing U.S. corporate profits parked overseas, their enthusiasm was in the context of comprehensive corporate tax reform, rather than replenishing the Highway Trust Fund. The fund is financed by a federal tax of 18.4 cents per gallon on gasoline and 24.4 cents per gallon on diesel fuel -- levies that have been in place since 1993. As highway fund receipts have plummeted over the years, Congress has needed to replenish the fund with general revenues.

When the president on Monday sent his $4 trillion budget for fiscal 2016 to Capitol Hill, National Economic Adviser Jeff Zients said, “The president has not proposed and has no plans to propose increasing the gas tax.”

Though Zients championed Obama’s “transition” tax alternative (“it’s got a lot of traction”), he -- like Donovan -- also invited Congress to find a compromise source of funding. “The president is open to other proposals and would consider other proposals that Congress contemplates,” Zients added.

The budget director talked about the gas tax and other budget issues during a Q&A with reporters organized by the Christian Science Monitor.

Alexis Simendinger covers the White House for RealClearPolitics. She can be reached at  Follow her on Twitter @ASimendinger.

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