U.S. Auto Makers Split on Gas Tax Hike

The Big Three domestic auto makers are divided over the idea of raising the federal gasoline tax to help reduce the budget deficit, unusual in an industry that often puts unity ahead of competition in lobbying Congress.

Ford Motor Co. and Chrysler Corp. favor boosting the 9-cent-per-gallon federal levy on gasoline by a nickel a year for three to five years. Every penny increase would raise about $1 billion.

But General Motors Corp., the nation’s largest automobile manufacturer, opposes any increase in gasoline taxes.

“We have constantly said, and I think Congress has said, that the gasoline tax is too regressive, that it hurts the poor people,” GM Chairman Roger B. Smith said. He discussed the issue with lawmakers during a visit to Washington last week.

Chrysler Chairman Lee A. Iacocca is an outspoken supporter of higher gas taxes, which he says would encourage people to drive more fuel-efficient cars. In the 1980s, Chrysler’s marketing strategy emphasized more fuel-efficient vehicles.

Iacocca said the higher taxes would boost conservation, lower the nation’s trade deficit and help counter global warming by curbing emissions.

“Consumers must demand more fuel-efficient vehicles, and today they have no reason to do that,” Iacocca said. The cost of driving has been cut in half since the 1960s when adjusted for inflation and improved fuel efficiency, he claimed.

Ford would accept a gradual increase in the gasoline tax as part of a package of consumption taxes, company spokesman Mark Miller said. “But we believe it should go toward reducing the deficit and not toward increasing government spending,” he said.

The gasoline tax frequently is mentioned as a potential source of new revenue as the White House and congressional leaders negotiate a deficit-reduction plan.

President Bush has indicated a willingness to abandon his no-new-taxes pledge. Senate Republican leader Bob Dole said this week that he expects Bush to reject income tax increases in favor of other sources. A White House spokeswoman said, however, that the President had ruled out nothing.

At the heart of the Big Three domestic auto makers’ disagreement is how a gas tax increase would affect auto sales.

GM contends that many people would delay new-car purchases. The company has predicted that a 15-cents-per-gallon increase would reduce sales by 500,000 and eliminate 120,000 jobs.

“I don’t think the country wants to see lower car sales,” Smith of GM said.

Chrysler agrees that a higher tax might hurt sales, “but not significantly,” spokesman John Guiniven said. “We also feel that reducing the budget deficit would reduce interest rates and that could spur car sales and the entire economy.”

Smith agreed that the federal Treasury needs new revenue but said Congress should focus on taxes that would affect a broader segment of the economy.

The Big Three are a powerful force on Capitol Hill. They usually reach common positions on legislative issues with a major impact on their industry, such as the Clean Air Act rewrite.

Sometimes, however, consensus eludes them.

“It isn’t the norm, but it does happen,” said Tim McCarthy, lobbyist for the Motor Vehicle Manufacturers Assn., which represents the Big Three, Honda, Volvo and some truck companies. “We spend a lot of time trying to reach a consensus. It’s a competitive industry, with differences of opinion.”

McCarthy said it was too early to tell whether the auto makers would clash if the budget summit produced an agreement to seek a gasoline tax increase.

Auto makers are more concerned with the impending clean-air negotiations and a bill awaiting Senate debate that would boost the minimum average fuel-economy requirement for new-car fleets to about 40 miles per gallon from 27.5, he said.