Federal tax to add another to pump prices Dec. 1

November 25, 1990|By Julia C. Martinez | Julia C. Martinez,Knight-Ridder News Service

Mideast war or no war, U.S. gasoline prices will jump a nickel a gallon next month as motorists involuntarily join drinkers and smokers in battling the federal budget deficit.

The Dec. 1 increase in the federal gasoline tax to 14.1 cents from 9.1 cents will boost the average motorist's gasoline bill by about $50 a year, according to Edwin Rothschild, energy policy director of Citizen Action in Washington.

That pushes the average annual gasoline tab to $1,430, based on the American Automobile Association's latest national average of $1.38 per gallon of gas.

"Earlier proposals to raise the tax by 12 cents was like stepping on a nail," said Lana R. Batts, senior vice president for the American Trucking Association. "Now, it's like stepping on a tack: It hurts, but not as much."

The increase comes at a time when consumers are still reeling

from the sharp increase in gasoline prices propelled by Iraq's invasion of Kuwait Aug. 2. Since then, pump prices have risen an average of 30 cents a gallon.

The tax on diesel fuel also will go up 5 cents a gallon, to 20.1 cents.

The extra tax could cost the nation's truckers $1.2 billion a year, about one-fourth of the industry's 1989 profit of $4.4 billion. But truckers, who made 20,000 phone calls trying to persuade lawmakers to reduce or eliminate the tax, will cover much of the extra cost by raising charges to customers, Mr. Batts said.

Proponents of the increase argue that raising the gasoline tax was one of the simplest and least painful ways to collect revenue to help pay for the growing budget deficit.

By government calculations, every penny-per-gallon increase will raise $1 billion in revenue. In all, the package of tax increases and spending restraints was aimed at cutting about $490 billion from the projected deficit over the next five years.

It is the first increase in the federal gasoline excise tax since 1983 and the first time since the tax was imposed in 1956 that money raised at the pump will be used for non-transportation expenses.

Eight cents of the current tax is earmarked for repair and maintenance of roads and bridges, 1 cent is for urban mass transit, and the remaining tenth of a cent is appropriated for the repair of underground gasoline storage tanks.

Of the new taxes, 2.5 cents will go to help reduce the budget deficit and the rest into the highway trust fund for road repair and maintenance.

A fringe benefit of the increase, tax advocates argue, is that higher gasoline prices will discourage consumption, help clean the air and reduce the trade deficit -- this because less oil will have to be imported.

Opponents say the tax -- coming on top of surging gasoline prices -- will unfairly burden people in Western states, who drive long distances to work, as well as rural residents

and farmers who depend on automobiles.

The tax will fall most heavily on lower-income people who spend a greater percentage of their paychecks on gasoline and who often use less efficient cars, opponents say.

Truckers were among a large contingent of lobbies, including oil companies, travel agencies, car dealers and cattlemen, that fought the tax increase.

"It's as disturbing as anything to us that gasoline got lumped into the sin taxes with beer and wine," said Richard F. Hebert, spokesman for the American Automobile Association.

"We find it hard to understand when people are using their cars to be productive, and that's considered a frivolous activity that should be taxed," he said.

Lawmakers also approved tax increases on beer, wine, liquor and cigarettes effective Jan. 1 to help pay for the budget deficit.

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