Raise Gas Taxes, Avoid the Fiscal Cliff?

US News

A group of natural gas and oil organizations sent a letter to members of Congress Tuesday morning, urging them to think twice before leveling any tax increases on the industry as part of fiscal cliff negotiations.

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The letter, shared with U.S. News by the American Petroleum Institute ahead of its delivery to members of Congress, was addressed to party leaders Harry Reid, Mitch McConnell, Nancy Pelosi, and Speaker John Boehner, and underscored the contributions the oil and gas industry have made to the struggling U.S. economy in the wake of the Great Recession.

Here's an excerpt of the letter:

Throughout the economic downturn, America's oil and natural gas industry has provided one of the few bright spots as the economy struggles toward recovery. Through hundreds of billions of dollars invested to develop vast new oil and natural gas reserves, and to expand our refining capacity, this industry is not only producing the energy a growing economy demands, but also creating tens of thousands of high paying jobs while generating billions in new revenue for the government. Therefore, any attempts to target the oil and natural gas industry for punitive tax treatment should be avoided as higher taxes could put the economic growth we've created at risk.

We fully recognize that a solution to the debt and deficit crisis facing the nation must be found. However, tax and revenue issues are best addressed as part of a comprehensive tax reform effort. We look forward to being part of constructive efforts post-Lame Duck when all issues, and all taxpayers, are considered equally--while providing an opportunity to remain focused on economic growth and competitiveness. Attempts to repeal or reduce normal business tax provisions for our industry outside of comprehensive tax reform could reduce investment, cost jobs, reduce government revenue, and make it even harder to achieve equitable tax reform.

The letter from API and its partners comes on the heels of news that business advocates and states are pressing lawmakers to raise the 18.4 cent per gallon federal gasoline tax as part of a deficit-reduction deal to avoid the fiscal cliff, a $500 billion double whammy of tax hikes and spending cuts set to kick in on Jan. 2.

[ENJOY: Political Cartoonists Take On the Fiscal Cliff]

The federal gas tax has been raised before as part of a deficit-reduction package, most recently in 1993. But while raising the gas tax might seem like low-hanging fruit for Congress when it comes to shaving the nation's trillion-dollar debt, the measure likely faces overwhelming public opposition, especially with gas prices already at near-historic highs. But supporters of the measure see it as a way to shore up funding for the nation's highway and road infrastructure, much of which has seen better days.

Critics say the rally to increase the federal gas tax to help offset the nation's financial problems is just another distraction from the core issue that continues to upend the country's balance sheets.

"This is emblematic of what's going on with fiscal cliff negotiations," says Curtis Dubay, senior tax policy analyst at conservative think tank The Heritage Foundation. "The problem is spending, and talking about tax increases is just another diversion on top of diversions."

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Meg Handley is a reporter for U.S. News & World Report. You can reach her at mhandley@usnews.com and follow her on Twitter at @mmhandley.

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