Friday, January 02, 2009

Federal Commission Proposes Higher Fuel Tax – New Punishment for Consumers – The cause and effect on Congressional power

In 2007, gasoline prices soared, hitting consumers hard – forcing most to cut back on spending in order to afford, not only the drive to work, but the rising costs of food and other goods affected by transportation costs. During the 2008 presidential campaign, John McCain and Hillary Clinton proposed a “Gas Tax Holiday” to ease consumer woes – this was shut down by the Democrat controlled congress based on fears that the loss of Federal Gas tax income which is earmarked for federal highway projects, would result in road construction layoffs.

The Federal Tax Rebate issued in early 2008, was intended to stimulate the economy, however, many used the funds to pay down debt associated with the rising cost of fuel. On the campaign trail, Obama urged consumers to invest in Hybrid’s, in order to cut dependence on foreign oil , and allow the US to become energy independent by 2015. The logic of hybrids – conserve energy and lower fuel costs being the main theme.

In May, 2008, oil prices were at climbed to $124 per barrel - the rise blamed on speculators and the Bush Administration. Consumer habits changed, and in part, resulted in a lowering of oil prices to the current level of $42.54, or the lowest level since 2004
The subsequent result of a drop in consumer spending as well as lower oil prices has resulted in a drop in tax revenues which are used to fund infrastructure projects. As a result, consumers can anticipate an increase at the pumps – and it is consumer habits that are, somehow, to blame.

In order to the infrastructure to be maintained (and include the increased “Big New Deal” infrastructure project by Mr. Obama to “stimulate the economy”), The National Surface Transportation Infrastructure Financing Commission, has suggested an increase in the Federal Fuel Tax or “fee”. Those who live in the Bay State, understand that taxes being unpopular are often referred to as “fees”, (or another word for “tax”).

Logic follows that should the federal gas tax rise to meet the demands of current and projected projects, consumers would be forced to make further cuts in their spending habits at a time when the nation’s retailers are are facing bankruptcy and looking to the Federal government’s Bailout program as an option.

One obvious suggestion to increase government income would be to further reduce government waste,something likely not to occur given the increase in the size of government programs (new “state owned” industry), and the Democrat controlled House and Senate. It may serve those currently in power to recall 1994, when the GOP swept into Congress and enacted popular tax cuts - this occurred due to a President Bill Clinton and the Democrat controlled Congress suggesting a rise in the gas tax. Should the incoming administration and in-concert legislature consider further rises in consumer taxes or “fees”, one can bet the house that there will be a change in leadership in 2012.

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