The Trump giveth and the Trump taketh?
During a private meeting with lawmakers last week, President Trump signaled that he would be open to a 25 cent per gallon increase to the federal gas tax. If your car has a 16 gallon gas tank (as many do), this would cost you an extra four dollars every time you fill up your car – and gasoline prices are already rising.
While a 25 cent per gallon tax may not seem like a lot of money, Strategas research found that, if enacted, “60% of the individual tax cut savings in 2018 would be wiped out by rising gasoline prices.” An eye-opening new report from Freedom Partners also breaks down what the impact of a gas tax hike would be for each state.
Plain and simple: If President Trump wants to fund a massive new infrastructure program (similar to Obama’s stimulus package in ’08) there is plenty of waste, fraud, and abuse he can cut to make it happen. He shouldn’t be reaching into taxpayers’ pockets (and severely undermine the economic progress made under his administration) to fund it.
Unfortunately, the gas tax proposal is not the only way the Trump administration is undercutting potential economic growth from its tax cuts. As Real Clear Markets editor John Tamny noted:
“[President Trump] lately made more noise about tariffs and a weaker dollar… money is what facilitates the trade that enables specialization, plus it facilitates the investment that fosters huge productivity leaps. Investors are buying future income streams paid out in money, so a devaluation of the dollar is by definition a tax on investment. It’s not likely to happen, but if Trump were to publicly state the importance of free trade combined with a stable dollar to lubricate exchange, stocks would soar. That he’s saying the opposite is logically not helping the investor outlook.” (emphasis added)
The devaluation of the dollar that Tamny refers to (as a de facto tax on investment) has already led JP Morgan to downgrade U.S. economic growth in the first quarter of 2018 to 2.5%. JP Morgan specifically cited the “hotter than hades” inflation report in their diminished economic forecast.
A gas tax hike, tariffs, and a weaker dollar threaten to sabotage a Trump economic boom that could be so much more. Let’s hope the administration reverses course on policies that will reduce the benefits of its historic tax cuts.
Photo credit: Gage Skidmore