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Increasing The Gas Tax…Seriously?

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The new Congress was convened this past week. It was a week to see new members get sworn in and people starting complaining after the first vote. One of the more interesting topics that floated around DC is the idea of increasing the gas tax. With the price of oil and gasoline falling, there has been call for increasing the gasoline tax. What was either more amazing or more shocking was the call for increasing the tax came from Senate Republicans.

As someone who is somewhat familiar with the trucking industry, increasing the gas tax is a job killer, especially for owner-operators. An owner-operator is a combination of an entrepreneur and independent contractor. They are the small businesses of Main Street compared to the bigger trucking companies that can absorb the regulatory costs. They are the ones that deliver the goods to the Costcos, the Walmarts, and the other major stores in the U.S.

What a lot of people do not realize are the expenses that an owner operator faces in operating his business. For instance, the monthly payment of a rig is the equivalent of your mortgage. The costs of replacing the parts are more expensive than replacing your average car parts, plus the emergency costs of getting a flat tire and the nearest mechanic shop is 15 miles away and you are in the middle of nowhere. Also, they have to factor in the necessary fees for state licenses to drive cargo. This does not include the other expenses that a small business face, i.e. phone, insurance, and etc…

Concerning taxes, the owner operator is taxed for gasoline twice on the federal level. They are taxed for the gasoline when they are at the pump. They are also taxed under the heavy equipment road tax, which is a one-time fee that they have to pay when the owner-operator pays the taxes.

Additionally, owner operators are taxed from International Fuel Tax Agreement (IFTA) on the state level. Pursuant to IFTA all truck drivers must file a report of which states they have traveled. They need to file an IFTA form three times a year. Depending on where they have traveled and how many miles, they may have to pay more taxes depending on how many times they have traveled to that state.

Lets also not forget that once they have paid these expenses, they can now focus on their expenses at home. As an alternative to increasing the gas tax, economist Larry Kudlow has published an article highlighting a Cato Study and their recommendations(H/T: Jim Pethokoukis). It will be beneficial for the new Republican majority to check that study, especially since they campaigned against runaway spending and over regulations during this past election cycle.

Chief Justice John Marshall penned the now oft-quoted refrain: “[t]he power to tax is the power to destroy.” Unfortunately for the owner operator, increasing the gas tax will destroy their businesses. For congressional Republicans who vote in favor of the gas tax, it may end their political careers as well.

  • Arthur, I’m certain that this issue will be discussed, robustly, at the GOP bicameral Congressional retreat this week. Let’s see if common sense makes the day and Republicans come out swinging for tax cuts, and if we’re lucky, a proposal for fundamental changes of the tax system.

    • Brian

      What I found particularly amusing was how they weren’t calling it a “gas tax” but a “user fee”. Not what I would call an auspicious start for the GOP.

      • And what is equally surprising is that not a lot of people are really paying attention to it, at least not outside the beltway.

      • Arthur Freyre

        The “user fee” comment did catch me by surprise. My hope is that the GOP is reminded not to forget the owner-operators. This is their business, not a hobby.

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