Reuters Edge

Obama won't raise gas tax

WASHINGTON (Reuters) - The U.S. Transportation Secretary, in an acrimonious exchange at a Senate hearing on Wednesday, pledged not to raise the federal gasoline tax, the funding source for repairing America’s roads and bridges.

“This administration -- in these hard economic times, with so many people out of work -- can ill afford to tell people we’re going to raise the gasoline tax,” Secretary Ray LaHood said after Sen. George Voinovich, a Republican from Ohio, suggested raising the tax to fund highway repairs.

LaHood’s declaration signaled that the Obama administration will take the same stance as former President George W. Bush.

Revenue generated by the tax of 18.4 cents on each gallon of gas sold in the country goes into the Highway Trust Fund to fix U.S. roads and public transit. That fund has already been depleted once and Congress had to pass emergency measures last summer to replenish it.

The tax has not been raised since the early 1990s and at the hearing of the Environment and Public Works Committee, Voinovich said an increase would help cover its shortfalls.

“How do you say to people you’re going to raise their gasoline taxes when 12 percent of the people in Michigan are out of work?” said LaHood, referring to the state with one of the highest unemployment rates in the nation.

“Then what you tell them is: ‘I’m sorry folks we’re not going to be able to do the job that needs to be done in our country...We’re going to delay this for a couple of years or whatever it is,’” Voinovich shot back. “But we have to be honest with people. It’s time to level with them.”

The Bush administration also opposed a tax hike and last summer suggested looking beyond taxes to privately run electronic tolling systems and tax incentives for transportation investments.

LaHood told the hearing that there are “a number of other things that will help us raise the revenue to satisfy the needs that we want to meet here.”

The recently passed economic recovery law included $27.5 billion for work on highways, bridges and tunnels.

Revenues for the Highway Trust Fund have been hurt by new cars with higher fuel efficiency and by drivers staying off the roads when gas prices spike. The fund is authorized by a transportation law that Congress must renew this year, and the committee will craft the Senate version of that legislation.

The tax has become politically divisive, with Arizona Sen. John McCain proposing a gas tax holiday when he ran for President in 2008. Obama opposed that proposal.

Sen. Barbara Boxer, the California Democrat who chairs the committee, suggested indexing the gas tax to inflation so it moves in step with the prices of gas and other goods.

LaHood told reporters he had not considered indexing, but the administration is fully opposed to raising the tax.

On Monday, the Department of Energy reported gas prices reached their second highest level this year, with the national price for regular unleaded gasoline at $1.96 a gallon.

(Editing by Chizu Nomiyama)

additional reporting by John Crawley and Tom Doggett