Larry Summers: Raise the National Gasoline Tax

WASHINGTON – Larry Summers, president emeritus at Harvard University and a former economic adviser to President Obama, recommended that Congress raise the federal national gasoline tax and/or impose a carbon tax to encourage energy efficiency.

The federal gas tax is currently 18.4 cents per gallon of gas in addition to state gasoline taxes.

The Trump administration is planning a large infrastructure investment project. President Trump has also proposed tax cuts for individuals and businesses and House Republican lawmakers say they’re getting to work on tax reform.

Summers said he would not support enacting “trillions of dollars of tax cuts” and “a very large infrastructure expansion” financed with debt.

“Something that should be said is there is every reason in the world for the gasoline tax in the United States not to have been allowed to be cut in half in real terms over the last 30 years as the congestion increased, as motor vehicle burden on highways increased, as the salience of carbon emissions increased,” Summers said during a discussion earlier this month on the “best bets” for public investment in infrastructure at the Brookings Institute.

“We should be taking much less regulatory and much more price-oriented approaches to encouraging energy efficiency as we are as a country. A higher gasoline tax would be an early – and/or a carbon tax would be important steps in that direction,” he added.

According to Summers, there is a “strong case” for a national infrastructure investment program equivalent to “1 percent of GDP each year going forward.” However, he said the best way for the federal government to finance infrastructure investment is difficult to assess because of the numerous other items in the federal budget.

“If the only major thing we were doing was substantially increasing infrastructure investment, I would be comfortable financing at least a substantial part of it with debt,” he said.

Summers added that there is “no reason why people who use infrastructure more heavily should not pay for it.”

Summers emphasized that “user fees” could pay for part of a national infrastructure package, but said he opposes tax credits for construction contractors.

“I see no merit in the idea that using tax credits for contractors to implement infrastructure investment will address any of these problems. I called it, somewhat inelegantly on television yesterday, a Potemkin village of nothing, and I think it is a singularly poor idea whose principle effect will be to enrich those who are the recipients of the credits, in many cases for projects that would have been undertaken anyway, rather than to bring about a necessary infrastructure revival,” he said.