Transit may benefit from new fuels-tax formula

October 19, 2010

WASHINGTON—State departments of transportation, which have long relied on gasoline and diesel fuel taxes to fund highways and transit programs, are asking Congress to replace the decades old pennies-per-gallon tax with a flat percentage tax, reports Dow Jones newswire.

The change is expected to increase dollars flowing into the Highway Trust Fund by almost $44 billion over six years, and debate could begin during a lame-duck congressional session following the November elections, said Dow-Jones.

Rather than tax gasoline at 18.4 cents per gallon, and diesel fuel at 24.4 cents per gallon, the new tax would be 8.4 percent on the price of each gallon of gasoline and 10.6 percent on the price of each gallon of diesel fuel, reported Dow-Jones.

Dow-Jones points out that raising the cents-per-gallon tax on motor fuels is not politically popular, but that the percentage tax would automatically increase federal revenue as the pump price of motor fuels increases – and insulate lawmakers from having to vote to raise motor fuels taxes in the future.

Republicans oppose the idea, however, according to Dow-Jones, which quotes Rep. John Mica (R-Fla.), the senior Republican on the House Transportation & Infrastructure Committee, as calling the proposed percentage tax a “non-starter.”