Proposed Federal Gasoline Tax: The US Government`s Dilemma
| Case Code: ECON093 Case Length: 13 Pages Period: 2017-20 Pub Date: 2020 Teaching Note: Available |
Price: Rs.400 Organization : - Industry :- Countries : United States Themes: Taxation/ Pricing |
Abstract Case Intro Excerpts
Introduction
On July 01, 2020, the tax on gas in California, one of the highest in the US, was increased to 50.5 cents per gallon, up from 47.3 cents per gallon as of June 2020. The increase came after several months of lockdown due to the Covid-19 pandemic and related restrictions in the country that resulted in a decline in state and local tax revenue. On top of state taxes, drivers also had to pay federal fuel taxes at 18.4 cents per gallon for gas and 24.4 cents per gallon for diesel, making it more expensive to fill the tank. However, the federal gas tax in the US had not been raised since 1993 despite the growing number of vehicles on the road and increasing transportation infrastructure needs. In February 2018, US President Donald John Trump (Trump) called for a 25-cent per gallon hike on the federal gas tax, which had remained unchanged for over the 25 years from 1993 to 2018. Trump said the money from increasing the gas tax would help fund the nation’s infrastructure plans. For 25 years, the federal tax on gasoline had remained constant at 18.4 cents a gallon and 24.4 cents per gallon for diesel. Trump’s proposal to increase taxes on fuel gained momentum as several Party leaders and business associations felt that it was necessary to fund the country’s infrastructure. Supporters of the gas tax hike remarked that since the gas tax had not been raised since 1993, there was an urgent need to consider it. Assuming the tax was hiked in 2018 it would generate government revenue of US$39 billion per year by 2022, and about US$840 billion in revenue through 2050, the US Chamber of Commerce , which supported the gas tax hike proposal, said...
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