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As Oil Prices Fall, Lawmakers Propose Higher Gas Tax

Gasoline prices have been plummeting in recent months due to falling oil prices. That means it’s time for federal lawmakers on both sides of the aisle to push for a gas tax hike while prices at the pump are falling.

Reps. Tom Petri of Wisconsin and Earl Blumenauer of Oregon are pushing legislation that would raise the federal gasoline tax 15 cents over three years and index it to inflation. Blumenauer, a Democrat, introduced the bill. Petri, a Republican, supports it, invoking the legacy of President Ronald Reagan, who pushed for a gas tax hike in 1982.

“For too long we have watched unmet infrastructure needs increase and the regular funding source to meet these needs become less and less relevant over time,” said Petri, who will be retiring this year.

“Ronald Reagan supported raising the gas tax back in 1982 because he believed in funding American infrastructure in a responsible way. I think he was right, and it’s the best course of action we can take at this time,” Petri said.

Lawmakers have been looking for ways to raise more revenue for the Highway Trust Fund (HTF) which has been in dire financial straits as cars become more fuel efficient, depleting the gas tax revenues its meant to survive on.

According to the Department of Transportation, the HTF had a cash balance of $6.5 billion as of June 2014, but it’s expected to have a shortfall again at the end of fiscal year 2014 — the HTF has run short on cash for the last 13 years.

According to the American Society of Civil Engineers, the U.S. needs to spend $2 trillion on surface transportation infrastructure to remain economically competitive with the rest of the world. The Congressional Budget Office estimates that the HTF will need an additional $100 billion to stay solvent through 2020.

The national average gas price is about $2.75, down significantly from $3.263, largely due to falling oil prices. Falling prices at the pump present a politically opportune time to push for a higher gas tax. When prices at the pump are high, voters are less willing to endure higher taxes.

The federal gas tax stands at about 18 cents per gallon. This is on top of state gas taxes which averaged about 23 cents in 2013, according to the Energy Information Administration. The last time the gas tax was raised was in the 1990s.

“We all use our roads, bridges and rail, whether we’re Republicans or Democrats, rural or urban,” Blumenauer said. “This should be our last gas tax increase ever, as we look for fairer and more sustainable funding methods, but it’s necessary to bridge the gap and keep our country moving.”

But critics of a gas tax hike argue it’s not going to solve the major problems with highway funding and is a “bait and switch.”

Anti-tax advocate Grover Norquist with Americans for Tax Reform told CNBC’s Squawk Box that Reagan admitted his gas tax hike “was the biggest mistake he made as president.”

“This is a bait and switch that politicians play all the time,” Norquist said. “President Obama spent $800 billion with a stimulus package, which was supposed to pave all the highways.”

“We should push down to governors and to mayors the responsibility for raising their own taxes and building their own roads,” he added.

It’s uncertain if a gas tax hike bill will be able to make it out of the House, and there’s even less certainty of it passing the Senate.

Norquist agrees that something needs to be done to fix America’s aging infrastructure, but the federal government should play little part in it.

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