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Should Gas Taxes Be Raised? A Look at the Pros and Cons

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American drivers are finally getting some well-deserved relief at the gas pump. After years of record-high prices, the cost of a gallon of gas has fallen to less than $3. Data compiled by GasBuddy shows that prices haven’t been this low since 2010. Some politicians say this is a perfect opportunity to raise gas taxes, or the tax on every gallon purchased at the pump. Others aren’t so sure. To help you decide, we’ve outlined the pros and cons of increasing this tax.

Pro 1: Source of Needed Tax Revenue

Raising gas taxes would create new revenue that the country desperately needs. These taxes are primarily used to build and repair the transportation system (roads, highways, bridges, etc.), and America’s infrastructure needs serious help. Greg Mankiw, a professor of economics at Harvard University, estimates that if the government raised the gas tax by $1, it would bring in $100 billion in extra revenues each year.

If the government raises enough from gas taxes, it could potentially lower other taxes as well. For example, states could lower their income tax rates to help offset the impact of a higher gas tax.

Con 1: Extra Strain on Americans’ Budgets

The biggest downside of a high gas tax is that it would create one more cost for Americans, many of whom are still looking for work in a recovering economy. At the same time, wages are not growing fast enough to keep up with the cost of living; even some who are employed still struggle to make ends meet. A higher gas tax would strip away some of the relief Americans are experiencing as a result of the currently low prices.

If prices go back up and a $1 gas tax is in place, Americans would end up paying even more: The $4-per-gallon prices we saw over the past few years would suddenly be $5.

Pro 2: Promotes Energy Independence

Taxes raise money, but they also influence behavior. By raising gas taxes, the government would make it more expensive to drive. As a result, Americans might look for ways to drive less, such as carpooling or taking public transportation.

This would reduce air pollution, encourage governments to improve public transportation, and promote American energy independence. Many of the world’s largest oil exporters are not on the best terms with the U.S., so some argue that dependence on oil is not ideal for our economy.

Con 2: Americans Love to Drive

While Americans driving less is great in theory, it’s just not possible for many people. Our entire society is structured around driving. People in suburban and rural areas need to drive almost everywhere they go. Even those in some major cities, such as Los Angeles and Houston, function better with a car. As a result, if the gas tax goes up, there’s no way for them to avoid taking a financial hit unless a different tax is lowered as compensation.

Like most political decisions, higher gas taxes create a trade-off of pros and cons. Americans need to understand the complete issue so that they can encourage their representatives to move in the direction that works best for them and their families.

I am a professional freelance writer from the United States that specializes in making insurance, investing, and retirement planning understandable. Having worked as a financial adviser, I add a layer of expertise to my writing that is simply impossible for someone without a financial background. During my career, I have worked with clients in nearly every financial field. Please see my website for writing samples, client reviews, and other information: www.davidrodeck.com