Biden Rebuff on Gas Tax Casts Doubt on Infrastructure Deal

The White House reiterated President Joe Biden’s opposition to indexing the gasoline tax to inflation to help pay for an infrastructure plan, raising new questions about the viability of a bipartisan compromise emerging in the Senate.

“After the extraordinarily hard times that ordinary Americans endured in 2020 -- job losses, shrinking incomes, squeezed budgets -- he is simply not going to allow Congress to raise taxes on those who suffered the most,” White House spokesman Andrew Bates said in a statement.

A bipartisan group of 21 senators has been working to finish a $579 billion infrastructure proposal to counter a $2.25 trillion plan that Biden initially proposed. A draft outline of the lawmakers’ plan obtained by Bloomberg lists several funding sources that have been opposed by the White House, including the gas tax proposal, a fee on electric vehicles and re-purposing unspent Covid-19 relief funds.

Biden told reporters on Friday that he’ll have a response to the plan after reviewing it next week. “I’ll tell you Monday when I get the copy of it,” the president said at the White House.

Some Democratic senators in the bipartisan group also are raising objections. Montana’s Jon Tester said Thursday that he would not support the plan if it ties future increases in the gas tax to inflation. Tester said he hoped that by Monday, the group could nail down the remaining details and release an outline.

House Speaker Nancy Pelosi also has shot down the idea, dashing prospects House Democrats would go along.

Senators said indexing the gas tax raises about $30 billion over ten years and it’s up to the White House to propose an acceptable alternative. But Republicans have rejected any adjustments to individual or corporate income taxes set in the 2017 tax law.

The administration views stepped-up enforcement of tax collection as a better approach than raising taxes on the middle class, a White House official said.

The White House earlier this spring proposed bringing in $700 billion in additional revenue by boosting spending on the Internal Revenue Service by $80 billion for audits, but some experts have questioned whether that those expectations are realistic.

The bipartisan group has proposed getting $103 billion in new tax revenue from increased tax enforcement by providing $40 billion in additional funding for the IRS. Senator Mark Warner said the group was exploring whether a larger IRS investment could yield more revenue.

Some Republicans have said the IRS cannot absorb a higher level of funding without waste or without resorting to the harassment of taxpayers who paid what they owe.

With the Senate and House out of session Friday, next week was seen by lawmakers as the target date to draft the plan into a formal piece of legislation.

Biden has repeatedly said he opposes raising taxes on those earning less than $400,000 per year. White House officials have said a gas tax hike would fall most heavily on low- and middle-income drivers.

“The president is firmly against any plan to reverse these hard-won gains by taxing middle-class families for simply driving to work or taking their kids to school,” Bates said.

©2021 Bloomberg L.P.

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