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American drivers, compared to those in other industrialized nations in Europe, pay relatively low federal, state, and local gasoline and diesel excise taxes. The federal taxes are used specifically to fund annual highway construction, maintenance, and mass transit. Over the years, proposals have come forth to raise the federal tax as a way to address long-standing national policy concerns, including U.S. dependence on imported oil and various environmental problems related to large volumes of gasoline consumption. Policy attention on the role of the gasoline tax has also increased recently due to three major developments. First, the 2008 oil and gasoline price run-up and subsequent economic downturn have led to a decline in gasoline tax revenues available for needed highway construction and maintenance. Second, the possibility of enacting some form of binding climate change legislation in the next several years will eventually mean an increase in the relative price of fossil fuels, including oil and gasoline. Third, the volatility of gasoline prices has affected investment planning (e.g. for alternative fuels) and arguably contributed to the troubles facing domestic automobile manufacturers. In the above context, this report outlines some of the macroeconomic and microeconomic pros and cons of using the federal gasoline ...