What a Higher Gas Tax Means For Your Portfolio

Source: Thinkstock

Source: Thinkstock

On Wednesday we learned that two senators—Bob Corker and Chris Murphy—have proposed a $0.12/gallon increase in the gas tax in the United States. This would add to the $0.184/gallon tax bringing the total to $0.304/gallon. It would also apply to diesel fuel, which is taxed at $0.244/gallon bringing the total to $0.364/gallon. The tax would be implemented in two $0.06/gallon steps over two years. The proposed measure is meant to fund the shortfall in the government’s Highway Trust Fund.

What does this mean for investors and what action should you take? While the tax increase doesn’t appear to be very large it can have an impact on several stocks that might be in your portfolio, especially if they operate primarily in the United States. Here are the companies that will be directly impacted.

1. Trucking companies

Diesel fuel is one of the largest input costs for a trucking company. Consequently these companies are going to see a direct and immediate impact on their businesses. This can happen in either one of two ways. The first is simply that their input costs rise. The second is that these added costs will be passed on to these companies’ customers, who will see an impact in their businesses and they will have to ship less. Investors should therefore consider selling trucking companies. A good alternative are rail transport companies. These companies have much lower fuel input costs and should be impacted less by the tax hike assuming it goes through.