Biden’s original proposal was to raise the corporate tax rate from 21% to 28%, but Republicans have maintained that is a nonstarter. GOP lawmakers have instead floated indexing the federal gas tax to inflation, which would raise it over time.
Sen. Mitt Romney, a Utah Republican who is taking part in the bipartisan infrastructure negotiations, emphasized that the plan did not contain any new taxes or immediate tax increases. “There are no user fees that are part of the package,” Romney told reporters at the Capitol on Wednesday. “Other than the fact that we have an ongoing gas tax, for instance, and the package does propose that we index the gas tax to inflation.”
A preference for consumption taxes over levies on corporations that could potentially hurt competitiveness, job creation, or wage growth reflects mainstream conservative economics. However, Republicans have become increasingly reliant on blue-collar and non-college voters in recent election cycles, which has made the party competitive in the Rust Belt at the presidential level for the first time since the 1980s.
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If inflation were to raise the gas tax, it could dismay some of those voters. Biden is said to oppose gas tax indexing as a way of paying for infrastructure, having vowed not to raise taxes on households making less than $400,000 a year. The liberal group Americans for Tax Fairness insisted in a statement that the GOP seeks to “make working families pay as opposed to wealthy corporations,” a line of attack that is likely to intensify if the plan moves forward.
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The federal gas tax is 18.4 cents per gallon for unleaded and 24.4 cents for diesel. It was raised to its current level in 1993 as part of a bigger tax increase President Bill Clinton signed into law. Congressional Republicans slammed the gas tax hike, which was included after a broader energy tax was scuttled, as a violation of Clinton’s promise not to raise taxes on the middle class.
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“Increasing the gas tax is not an optimal look for a working-class party, but the specific increase in the package, indexing the levy to inflation, is probably small enough to pass muster,” said Henry Olsen, senior fellow at the conservative Ethics and Public Policy Center and author of The Working Class Republican. “If the package includes first-time-ever levies on electric cars, which currently pay nothing for the roads they use and are largely driven by the well-off, then working-class voters could easily see this package as something they win by.”
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Some allies of former President Donald Trump believe that Republicans should have led with an infrastructure plan in 2017 rather than a failed attempt at repealing and replacing Obamacare.
Despite many an Infrastructure Week, a final plan for Congress to act upon never materialized.
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