Gas taxes and your bottom line
Many industries rely heavily on time in their vehicle, not just truck drivers and delivery trucks. Sales professionals hop in their vehicles throughout the day, as do many other types of professionals (service providers like plumbers, and so forth). For that reason, gas prices and taxes are a relevant line item that must be budgeted for 2015, but with politicians making the rounds to push for higher gas taxes, budgeting becomes more complicated.
Gas prices are down roughly 50 cents per gallon compared to a year ago, which some analysts say have contributed to more money in consumers’ pockets. Some believe that this will improve holiday sales, but others believe the timing is just right to increase federal taxes on gas. The current tax on gas is 18.40 cents per gallon, and on diesel are 24.40 cents per gallon.

Supporters and opponents are polar opposites
Supporters argue as follows: gas prices are low, so it won’t hurt to increase federal gas taxes, in fact, those funds must go toward improving our infrastructure, which in the long run, saves Americans money because smoother roads mean better gas mileage and less congestion.
Gas taxes have long been a polarizing concept, and despite lowered gas prices, the controversial nature of the taxes have not diminished.
While some are pushing for complete abolition of federal gas taxes, others, like former Pennsylvania Governor, Ed Rendell (D) tell CNBC, “Say that cost the average driver $130 a year. They would get a return on that investment” in safer roads and increased quality of life, he added.
The Washington Post‘s Chris Mooney points out that federal gas taxes have been “stuck” at 18 cents for over 20 years, last raised when gas was barely a dollar a gallon and that the tax must increase not only to improve the infrastructure, but to “green” our behavior, and help our nation find tax reform compromise.
Is a gas tax politically plausible?
Mooney writes, “So, this is not an argument that a gas tax raise is politically plausible — any more than a economically efficient tax on carbon would be. It’s merely a suggestion that — ignoring politics — it might be a pretty good idea.”
Rendell noted, “The World Economic Forum, 10 years ago, rated us the best infrastructure in the world,” adding that we “need to do something for our infrastructure, not in a one or two year period, but over a decade.”
Others would note that this rating has not crumbled in just a few years, that despite many bridges and roads in need of repair, our infrastructure is still superior to even the most civilized nations.
Regardless of the reasons, most believe that Congress won’t touch this issue with a ten-foot pole, especially leading up to another Presidential campaign season starting next year.
“I think it’s too toxic and continues to be too toxic,” Steve LaTourette (the former Republican congressman best known for his close friendship with his fellow Ohioan, Speaker John Boehner) tells The Atlantic. “I see no political will to get this done.”
Whether the time is fortuitous or not, and regardless of the positive side effects, many point to a fear of voters’ retaliation against any politician siding with a gas hike, so this matter going any further than the proposal stage is unlikely.
Matt Carter
May 19, 2009 at 12:55 pm
There has been a lot of noise in the blogosphere that HUD might back down on Housing Secretary Shaun Donovan’s promise that the FHA will allow tax credit bridge loans. But HUD has remained adamant all along that FHA will be issuing instructions to lenders (a “mortgagee letter”) outlining the rules.
HUD seems to have created a lot of confusion by issuing a mortgagee letter last week and then withdrawing it. A HUD spokesman told me today that the letter was a draft that was posted “inadvertently” and that the final version is coming out “shortly.”
But there has been no “on again off again HUD information releases contradiction.” In his May 12 announcement, Donovan said the guidelines would be published shortly. Every time I’ve asked them since, HUD continues to say the final guidelines will be published shortly.
Rather vague, but HUD has never said it was backing down from Donovan’s promise — people just assumed that when the mortgagee letter disappeared without explanation.
The big question seems to be whether the final guidelines will be more limited than those outlined by Donovan and spelled out in the draft mortgagee letter.
Jason Lopez
May 19, 2009 at 4:21 pm
“I rarely believe anything that has the air of politics until it’s upon us.” Really? Tell that to the banks that got TARP funds and now want to repay them but can’t. Drastic times require drastic action. Not saying I agree with all of it, but these types of programs are out there and several states already have similar types of programs in place, so why not think it will happen?
Nashville Grant
March 10, 2010 at 12:58 am
Jason is correct. Politians are out there trying to be heroes with these halfcocked programs meant to return us to prosperity when in fact, they may be leading us the opposite direction.
Matt Stigliano
May 19, 2009 at 4:26 pm
Matthew – Pam also stopped by my ActiveRain post about this and commented. It was nice to see the update, but I too questioned why NAR couldn’t (and wouldn’t) just send an email after they got this whole thing started. I never thought HUD just took the program away, I thought they just announced prematurely (and whether or not Secretary Donovan’s intention was to announce or discuss the possibility, the fact remains that they released the mortgagee letter).
I know I shared the link with you before, but if anyone wants to read more ranting and raving about the issue:
https://budurl.com/NARGoat
Matthew Rathbun
May 19, 2009 at 4:59 pm
Matt / Jason,
Thanks for commenting. I think that hesitation is not that something will or wont happen, but will it really be beneficial overall? I just won’t know until I see it in practice.
The initial $7,000 “credit”, that was really a federal loan is a recent example of why I’m hesitate to believe in it’s benefits until I actually see it in action and hear from those smarter than I, about its virtues.
Paula Henry
May 19, 2009 at 9:38 pm
The news today is the motion has been rescinded and they will not be using the $8000 tax credit as downpayment. Critics say it’s too much like DPA’s and credits should not be used as debt.
https://www.azcentral.com/arizonarepublic/business/articles/2009/05/18/20090518biz-downpayment0519.html
Waiting for the zero down FHA next……….
Matt Carter
May 20, 2009 at 10:47 am
Paula, the story was wrong, and the paper has published a follow up story on HUD’s intention to follow through and issue a mortgagee letter.
https://www.azcentral.com/arizonarepublic/business/articles/2009/05/20/20090520biz-downpayment0520.html
BTW, there was legislation in play that would have lowered FHA down payment requirements to zero, but the House and Senate could not agree on other aspects of so-called “FHA modernization,” including risk-based premium pricing. HUD was behind the idea — citing it as a reason they could eliminate seller-funded downpayment assistance.
By the time the FHA modernization bill got passed last year, lawmaker’s attitudes about zero down had changed and the minimum was instead INCREASED from 3 percent to 3.5 percent.
Anytime you need Congress to do something (like the tax credit), I think it’s safe to say you’d better not assume it’s going to happen until the legislation is on its way to the President’s desk.
In this case, HUD seems to have the authority to dictate what the policy is going to be, so you can bet they are trying to word something that fulfills the promises made by the Housing Secretary (although there is some speculation they might need legislation to do everything Donovan promised).
Ditech Mortgage
May 20, 2009 at 11:38 am
Evidently, the FHA bridge loan program cannot be used until certain changes are made, such as:
1. Agencies and lenders must be approved who have funds for the down payment.
2. A Change to the HUD guidelines on the time frame that is allowable for a bridge loan.
3. A change to the IRS guidelines allowing the refund to be assigned to an agency or lender.
Matt Stigliano
May 20, 2009 at 2:09 pm
Matthew – I think it just gives one more reason for buyers to be hesitant. Will they, won’t they, how will they…? Instead of getting on with life, people are getting stuck in this perpetual “waiting for the news on the market.” It’s not helping move houses and clear up inventory, that’s for sure. If they did pass it, I wonder how many people would sit back and say, “I’m not going to buy yet, I think I’ll wait until they improve this deal (much like did with the $7,500 vs $8,000).” It’s become like technology, most people don’t want to buy version 1.0, because they know 2.0 will be way cooler – and most likely cheaper (iPhone?).
Paula Henry
May 20, 2009 at 8:44 pm
Matt – Thanks for the follow up – it sounds promising, but everytime a “new” promise comes along, it seems to confuse the buyer more.
Today, I talked to someone who is only interested in a bank owned for the $2500. credit being offered locally if you buy a bank owned home. Often it’s not the best deal.
I think first time homebuyers will ultimately be better off taking the tax credit.
Dwight Shreve
May 29, 2009 at 4:59 pm
Funny how they got rid of SFDPA because the buyer didn’t have any “skin” in the transaction, yet now they want to find a way to monetize the tax credit to be used for a downpayment. SFDPA cost taxpayers $0, yet they got rid of it only to try and find a way to do the same thing that costs taxpayer dollars. I picture Congress as a bunch of chimps in suits eating bananas.
Lucky for us, we have put together a program that monetizes the tax credit to be used as a downpayment. We started and got this program approved before any of this HUD non-sense.
It meets current FHA guidelines, a handful of lenders have already approved it and we are moving forward with it.
Interested? Visit my website http://www.fthbtaxcreditsolutions.com to learn more about it!
Matt Carter
June 1, 2009 at 11:36 am
The uncertainty about how this would actually work after it was announced by the Secretary of Housing on May 12 has been resolved with the the issuance of the FHA letter to mortgagees on May 29 spelling out the rules.
The bottom line is that the tax credit can be “monetized” and applied to the down payment or to cover closing costs on an FHA-backed loan — but the money can’t be used to meet the FHA’s 3.5 percent minimum down-payment requirement.
See Mortgagee Letter 2009-15.
However, there are state housing finance agencies that offer soft seconds — including some programs that take the borrower’s anticipated tax credit into account as part of the underwriting process — that CAN be applied to FHA’s minimum down payment requirements.
In other words, you can’t use money obtained solely on your expectation that you will be getting this tax credit to FHA’s 3.5 percent minimum down payment requirement. But you can use it to make an additional down payment and for closing costs.
And your eligibility for the tax credit may help you obtain a soft second loan from a state HFA that you can use to meet FHA’s 3.4 percent down payment requirement.
Here are some states that offer first-time homebuyer tax credit loan programs.
https://www.ncsha.org/section.cfm/3/34/2920