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Unformatted text preview: n. They would use the revenue from this tax increase to finance additional spending on highways and other transportation projects, which they say will benefit the economy. Macroeconomic analysis performed by the Center for Data Analysis at the Heritage Foundation, however, shows that increasing the gas tax would depress economic activity and the incomes of millions of Americans. It would also raise significantly less revenue than its proponents project. The President should b e commended for his firm stand against raising the federal gasoline tax, and Congress would do well to abandon proposals to increase the gas tax and instead focus on spending highway dollars more efficiently, ideally by turning them back to the states.[1] The Real Cost of the Gas Tax Analysts in the Center for Data Analysis (CDA) estimated the economic and fiscal effects of a higher gas tax using a well-known econometric model of the U.S. economy.[2] The model allows analysts to vary the gas tax and simulate the effects of higher spending on infrastructure construction, if adequate details about that construction are available. Because such details were not available, CDA analysts instead used the additional revenues from the higher gas tax to pay down natio nal debt, which is an alternative way of infusing government spending into a segment of the economy that is tightly aligned with investment decisions. [3]This macroeconomic analysis found that: Personal savings would average $8 billion less per year from 2005 to 2014. $82 billion of the $131 billion increase in federal revenues over 10 years would be financed out of foregone or lower personal savings. Gross Domestic Product would decline by $6.5 billion per year, in real terms, from 2005 to 2014. In other words, this $131 billion in government revenues would shrink the economy by $65.5 billion. There would be, on average, 37,000 fewer job opportunities each year. That works out to one lost job for every $351,000 in new taxes, which is equal to 11 years of work at average yearly wages.[4] Total federal revenues would fall short of gas tax proponent's projections by $3.7 billion. Family disposable income would be, on average, $2.5 billion less per year, in real terms. That's equivalent to the cost of sending 5 32,600 students to college each year. [5] Congressman Don Young (R-AK) proposed an increase of the federal gas tax from 18.4 cents per gallon to 23.85 cents per gallon in the first year as part of the 2004 highway bill. While this twenty-nine percent tax increase has not generated major support, Congress should not bring the gas tax increase back as a policy proposal. While raising the gas tax would increase government revenues, it would only do so at the expense of economic growth, jobs, and family income. 12 | P a g e Taxes Bad DA BDL Tax Increases Cause a Recession [____] [____] Maintaining low tax rates critical to stop an economic downturn Bloomberg, 2010 (August 17, http://www.bloomberg.com/news/2010-08-17/tax-cuts-are-only-way-to-economic-grow...
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This document was uploaded on 02/06/2014.

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