Whenever the price of oil spikes, it’s a sure bet that some U.S. politicians will propose another gas tax holiday. So now that oil has fallen below $85 a barrel, and with America’s highways and mass-transit systems starved for funding, is anyone in Washington sensibly calling for a gas tax increase?

Of course not. But the economic case for a gas tax hike is compelling, and Congress should be paying attention.

America’s old and creaky transportation infrastructure is a major drag on the economy. Last year, road congestion cost Americans $124 billion in lost time, wasted fuel and higher business costs. Many economists – led by Larry Summers – believe that massive public infrastructure investment that expands economic capacity is the best hope for shaking our economy out of its low-growth, stagnant-pay doldrums.

The federal gas tax is the primary source of highway and mass-transit funding, but Congress hasn’t increased it since 1993, when it hit 18.4 cents a gallon. But inflation has since cut its value by 40 percent, and rising fuel efficiency, coupled with the proliferation of hybrid vehicles, has also reduced its value.

Last summer, Congress had to punt on a long-term transportation-funding bill because, with no gas tax hike, there was no money to pay for it. Instead, lawmakers came up with a 10-month fix financed largely by accounting gimmicks, which means they’ll have to deal with this issue again in the spring. The recent drop in oil prices creates a chance to revisit the challenge a little early.

To remove some of the political sting involved, congressional leaders could peg an increased gas tax to the price of oil – so that if oil prices rise again, the tax would come down, at least a little.


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