Could cheap U.S. gas lead to higher taxes?

For two decades, politicians have generally stayed far away from the gas tax. Americans are so sensitive to what they pay at the pump that the idea of raising gas taxes was considered politically untouchable.

But that may be changing now that gas prices have plunged to their lowest levels in four years. If there ever was a perfect time to raise gas taxes, now would be it. Which is why it's no surprise that federal and state lawmakers are showing new interest.

The federal gas tax is 18.4 cents a gallon, and it hasn't been raised since 1993. Most states also charge their own gas taxes, and the average is 23.5 cents per gallon (see here for a state-by-state breakdown here).

Inflation has hammered away at the buying power of that tax revenue for years, and now the federal gas tax generates one-third fewer dollars in real terms than it did in 1993, according to the Tax Foundation. That means less money to repair highways and bridges, while the U.S. transportation system crumbles. The American Society of Civil Engineers gave America's roads a D in its last report card, citing congested highways that cost the economy some $101 billion in wasted time and fuel a year.

The federal Highway Trust Fund, which gets most of its money from the federal gas tax, is nearly broke. The Congressional Budget Office says the fund will run out of money in the current fiscal year and will steadily accumulate shortfalls from then on.

The picture isn't much better at the state level, particularly for those states with gas taxes that rise or fall along with the price of gasoline or the inflation rate. In Kentucky, for example, revenue from fuel taxes has fallen in four of the last five quarters, Stateline reports, and lawmakers expect $24 million less for the state's transportation fund over the next six or so months.

The combination of low gas prices and the brighter national outlook for jobs and wages is now making more lawmakers feel comfortable with raising a gas tax. Even some Republicans are talking about the once-forbidden subject in public.

Iowa Gov. Terry Branstad said Monday he wants to see bipartisan support for such a move, but added that he wouldn't offer his own plan because it would give critics "a target to shoot at," according to The Gazette. "I think the timing is right in light of the fact fuel prices have dropped significantly," he said at his weekly news conference.

Sen. John Thune, R-S.D., recently criticized President Obama for not raising the gas tax. "I always thought that was ironic, that he's willing to raise every other tax," Thune told The Rapid City Journal last month. "And then the one that actually pays for something you can see a direct benefit from, he doesn't want to talk about it."

The prospect of higher gas taxes haven't moved into the nationwide conversation yet, however, and it's unclear if that will ever happen. While more lawmakers are starting to discuss the idea, many still say the subject resides firmly on the third rail of the nation's politics.

"I think it's too toxic and continues to be too toxic," Steve LaTourette, a former Republican congressman and a close friend of Speaker John Boehner, told The Atlantic. "I see no political will to get this done."

  • Kim Peterson

    Kim Peterson is a financial journalist covering business and the economy. She has written for several online and print publications, including MSN Money and The Seattle Times.