Gasoline prices have continued their extraordinary drop. CNNMoney reports that the average price has fallen to $2.25 a gallon, a 45 percent decline from the prices this summer. Locally, a few gas stations here are flirting with prices below $2.
The lower prices provide immediate relief to families, many of whom are already struggling with debt and joblessness. The prices obviously make travel easier, but also free up some money for other purchases.
That said, there is also a downside to the lower prices. Since the start of the year, Americans have dramatically cut back on their energy use and begun to reassess their love affair with gas-guzzling SUVs and trucks. While people are better off with lower prices, somewhat higher prices do serve a purpose.
With gas prices where they are and possibly falling further, it's time for the federal government to consider raising the gas tax, perhaps by 25 cents this year and 25 cents next year. The federal tax currently stands at 18.4 cents per gallon, which is the same level that it was in 2003. An adjustment for inflation alone would increase the tax by 10 cents a gallon.
Revenue from the gas tax could go to much needed-highway infrastructure projects and to public transportation projects, like rail improvements along the Eastern U.S. corridor. Revenue could also go to deficit relief.
The increases could also be conditioned on subsequent gas prices. If prices shot back up, the increases could be deferred or temporarily rescinded.
Tax increases are never popular, but the timing is right here to raise gas taxes before consumers grow accustomed to the lower prices.