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Obama should boost gas tax, then build floor under price of gasoline

With broad support for a federal stimulus package partially aimed at the nation's transportation infrastructure, it's appropriate to raise the federal gasoline tax that funds the federal highway trust fund.

The stimulus package expected to be passed by Congress and signed by President Barack Obama in January will provide funding for "shovel ready"road- and bridge-repair projects. It also is believed that Obama wants to direct some of the stimulus package toward longer-term projects that promote energy efficiency including, possibly, high-speed rail.

But the normal funding system that pays for most highway projects, the federal highway trust fund created in conjunction with President Dwight D. Eisenhower's massive federal highway program in the 1950s, is struggling to keep up with demands. The trust fund was depleted in 2008 and had to receive an $8 billion infusion from Congress in September. The fund also ran short of funding needs in 2007, and is expected to come up short again in 2009.

One solution to the trust fund's short-term problem is to increase the federal gasoline tax, which has remained at 18.4 cents since 1993. A five-cent increase in January would solve the short-term deficits in the fund, since each one-cent increase brings in about $1.9 billion.

That five-cent increase also would return the federal gasoline tax, when adjusted for inflation, to close to the 3-cents-per-gallon tax created in 1956 to fund Eisenhower's highway initiative.

Longer-term highway funding problems will require politically difficult decisions or a different approach to highway and transportation funding.

Efforts to reduce America's dependence on foreign oil and limit greenhouse gases linked to global warming will mean that the U.S. fleet of cars and trucks will boast higher miles-per-gallon ratings. More fuel-efficient vehicles mean that even with no drop in total miles driven, the consumption of gasoline — and the associated federal gasoline tax revenue — will decline.

One proposal to address the expected drop in gasoline consumption is to make the federal gas tax a sales tax, so that it would increase as the price of gasoline spikes, as it did last summer.

Taking a longer-term view and a broader scope, there will be pressure for Obama to back the establishment of a gradual, multi-step boost in federal gasoline taxes that would keep the price of gasoline above a certain level.

Low gasoline prices that motorists now are enjoying pose a problem for a government policy promoting higher-mileage cars. Obama and others concerned with both the U.S. dependence on foreign oil and global warming probably will need to keep gas prices above $3 a gallon — or higher — to encourage the public to buy fuel-efficient cars.

The financial bailout proposals aimed at helping Detroit contain mandates to produce more hybrid vehicles. But selling those vehicles will be difficult if gasoline remains below $2 a gallon. This problem already has been illustrated in the 50 percent drop in sales of Toyota's Prius model, a hybrid that was a top-selling car during the summer's $4-a-gallon gasoline price spike.

To take some of the sting out of such a gas-price floor, Obama might propose a tax credit aimed at lower-income drivers.

Soon after being sworn in, Obama should push for an immediate 5-cent-a-gallon gasoline tax increase to help replenish the federal highway trust fund. Then, he should begin to make the case for the necessary, but politically challenging, change of putting gasoline on a path toward consistently higher prices to encourage conservation and create a sales environment favoring higher-mileage vehicles such as hybrids, diesels and battery powered cars.

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