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Tuesday, April 27, 2021

Bipartisan Group in Congress Wants to Hike One Tax That Mostly Punishes the Poor

New taxes are always bad news, but this one is particularly alarming.

Composite Image By FEE | Image Credit: PixaBay

This article is excerpted from the FEE Daily, a daily email newsletter where FEE Policy Correspondent Brad Polumbo brings you news and analysis on the top free-market economics and policy stories. Click here to sign up.

In today’s hyper-partisan political environment, our elected officials can hardly agree on anything. The one consistent exception? Lawmakers always seem able to come together to find new ways to spend and tax away our money.

The latest example comes courtesy of the House’s bipartisan “Problem Solvers Caucus.” The group of 58 lawmakers from both parties released a plan to pay for infrastructure spending in part by raising the gas tax.

New taxes are always bad news, but this one is particularly alarming. Gas taxes and other levies on transportation disproportionately hurt poor and working-class Americans, who, after a year of lockdown-induced recession, can hardly afford another gut punch from our political class.

But everyone uses gas, right?

Well, not in the same amounts. Some people have cars while others do without, and some take public transit while others commute via car. The result is that lower-income Americans disproportionately spend a higher share of their income on transportation. The average American spends 13 percent of their income on transportation, but the bottom 20 percent of earners typically spend 29 percent of their income on it—more than twice as much.

The overall trend is quite clear: Wealthier people tend to spend much less of their income on transportation costs.

Image Credit: Institute for Transportation and Development Policy

Increased gas taxes would mean higher prices at the pump—even though gas prices are already quite high right now. These extra costs would hit struggling Americans the hardest, making the gas tax proposal seem indefensible. If lawmakers want to solve their budget headache, maybe they should start by stripping out all the unrelated waste and partisan spending in President Biden’s multi-trillion-dollar “infrastructure” proposal before they squeeze more out of the working class.

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