Dream of gas tax holiday falters over job losses

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Despite calls from the presidential campaign trail for a Memorial Day-to-Labor Day tax freeze, lawmakers quickly concluded with a prod from the construction industry that having $9 billion less to spend on highways could create a pre-election specter of thousands of lost jobs.

Now, lawmakers quietly are talking about raising fuel taxes by a dime from the current 18.4 cents a gallon on gasoline and 24.3 cents on diesel fuel.

With gas prices setting records daily, Republican presidential hopeful John McCain and former Democratic candidate Hillary Rodham Clinton called for a 90-day suspension of the federal fuel tax to give drivers a little relief at the pump. The fuel taxes go into the Highway Trust Fund, which is used for road construction and repair and mass transit.

Clinton suggested making up for the loss by imposing a windfall profit tax on oil companies, an idea that Republicans rejected. McCain said the money could come out of the general Treasury fund, in effect adding to the federal deficit, and is still getting mileage from the idea.

"Some economists don't think much of my gas tax holiday," he said in a speech this month. "But the American people like it, and so do small business owners."

Barack Obama, the likely Democratic nominee, opposed the idea from the beginning and the White House gave it a cold shoulder. Depriving the 52-year-old Highway Trust Fund of $9 billion at a time when it is heading into the red doomed the notion of a gas tax holiday in Congress.

The chairman of the House Transportation and Infrastructure Committee, Rep. James Oberstar, and the chairman of the highway subcommittee, Rep. Peter DeFazio, presented fellow lawmakers with a list of how many jobs and how much money each state would lose. It ranged from $30 million and 1,000 jobs in Vermont to $664 million and 23,000 jobs in California.

"Because the trust fund is already looking at a looming shortfall, it would have moved project cancellations into the construction season," DeFazio, D-Ore., said in an interview. He said it was "highly unlikely" that oil companies would have passed savings along to consumers.

Just three years ago, that trust fund enjoyed a surplus of $10 billion. Even without a tax freeze, the fund is projected to finish 2009 with a deficit of $3 billion. That that could grow as Americans drive less and buy less gas because of higher pump prices.

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