U.S. Chamber Suggests Gas Tax Hike, Immigration Changes

Blog Post
Tuesday, January 23, 2018

The U.S. Chamber of Commerce has presented a new infrastructure plan that includes a realistic look at two key issues: the federal gas tax and the need for immigration policies that will ensure a sufficient labor force.

On the gas tax, the chamber is proposing a 25-cent per gallon increase, indexed to inflation and improving fuel economy. It would be phased in over five years, although chamber President Thomas J. Donohue indicated last week that he would also be happy to see the full increase done all at once.

This is a reasonable proposal. The current gas tax of 18.4 cents per gallon has not been increased in 25 years. Thus its value has declined substantially because of inflation, and more fuel-efficient vehicles have cut into the revenue raised as well. (The federal tax on diesel fuel, which would also be raised, is currently 24.4 cents per gallon.)

The basic principle behind the gas tax is that the more some people and businesses use the roads, the more they should help pay for them. This “user pays” principle makes sense but over the years lawmakers have shied away from it, even when federal highway funds were running short.

The Trump administration, however, indicated last year that it might be open to an increase in the gas tax.

Donohue acknowledges that a hike in the tax would be “a tough vote” in Congress. But in unveiling the chamber’s infrastructure proposals at a program last week, he built a strong case for increasing the tax: “It’s the simplest, fairest, and most effective way to raise the money we need for roads, bridges, and transit.”

The federal highway and transit trust fund, he said, faces a $138 billion shortfall over the next decade. He said the chamber’s plan for a phased-in 25-cent increase would raise $394 billion over that period.

The Concord Coalition has long recommended an increase in the gas tax. We have written, for example, that the highway trust fund would be in a stronger position “had its dedicated revenue source been allowed to grow with inflation. But instead of rectifying this problem or finding an alternative source of dedicated revenue, Congress has largely relied on fiscally irresponsible patches funded by general revenue transfers and gimmicks.”

The chamber’s infrastructure plan also stresses the need for a skilled workforce, including immigrants, to build the envisioned projects.

“Nearly 80 percent of construction firms report that they are having a hard time finding qualified workers,” Donohue said. “At the same time, by some estimates, every $1 million in additional infrastructure spending means an additional six to seven construction jobs. Who is going to fill those positions?”

The chamber suggests a number of options, including more apprenticeship programs, to help with this problem. In addition, the chamber’s plan says: “We need to keep the skilled workers who are currently in the workforce because of programs like DACA (Deferred Action for Childhood Arrivals) and TPS (Temporary Protected Status). Ultimately, Congress must enact immigration reform so that we can attract and admit the skilled workers our nation needs.”

This is a reminder of the tension between President Trump’s desire for rapid economic growth and his anti-immigrant sentiments. With the aging U.S. population, thousands of workers are retiring every day. Replacing them presents the American economy with an enormous, long-term challenge that goes far beyond just new transportation projects.

So Washington policymakers should be generally focused on the need for additional workers. Without that, the country’s economic future will likely be hobbled.

The Chamber of Commerce infrastructure proposal includes some other elements, notably calls to “streamline” the permitting process and expand financing options for local communities.

Congress and the president, however, should give particular attention and consideration to the chamber’s gas tax proposal and to its warnings about the need to include immigrants in the skilled workforce that will be needed for stronger economic growth.