Gas Taxes Set to Rise
in Some States
SHANNON McCAFFREY / AP 8jun2008
All of the talk among political candidates about a federal gas tax holiday to offset soaring prices at the pump misses a critical fact: state taxes are, for the most part, even more costly for drivers.
And in some states, gas taxes are rising even higher, with a handful set to jump at the height of the summer driving season.
The average state sales tax on gasoline is 28.6 cents a gallon, according to the American Petroleum Institute. That's a dime more than the federal gasoline tax of 18.4 cents a gallon.
And while the federal rate hasn't increased since 1997, the amount drivers pay in state taxes can jump every year — or even every day — inching up as the price does.
The national average price rose Sunday to $4 for a gallon, according to AAA and the Oil Price Information Service, though, drivers in many parts of the country have already been paying well above that price for some time. Gas prices are expected to keep climbing, putting greater pressure on consumers, businesses and state legislators.
Some lawmakers have talked about providing relief by suspending the gas tax, but few proposals have gone anywhere. States rely on gas tax dollars to build and repair infrastructure. With many roads and bridges crumbling, elected officials are reluctant to give that money up.
Some warn that cutting the tax revenue — even temporarily — can deepen the woes.
"There's a need here and if we don't take care of it will only get worse," said Patrick Natale, executive director the American Society of Civil Engineers.
The roughly three dozen states that use only a flat tax on gas may face declining revenues as motorists pinched by high fuel prices try to drive less.
In the dozen or so states where the tax is tied, at least in part, to the price at the pump, the skyrocketing of gas prices has meant an unexpected windfall.
California, which has the highest gas tax in the nation according to a survey by the American Petroleum Institute, would rake in $5 billion this year if the price at the pump remains at $4 a gallon. That's more than double the $2.1 billion the state took in gasoline tax revenue in 2003, state revenue officials said.
Presumptive Republican presidential nominee John McCain has said he supports a temporary halt of federal gasoline tax. His Democratic rival Barack Obama calls such a proposal a gimmick.
Still, some states have considered rolling back their state gasoline tax.
So far, only Georgia has moved to provide relief. Gov. Sonny Perdue signed an executive order halting what would have been a state tax increase of 2.9 cents per gallon beginning in July, just as many families were hitting the road for summer vacation.
Perdue, who suspended the entire Georgia tax on gasoline for a month in the wake of Hurricane Katrina, said it's unfair for the state to reap a tax windfall on the back of cash-strapped residents.
"Frankly, I don't think we can justify raising taxes on gasoline in a time of economic stress for many families," the Republican governor said.
But the largesse has a cost: he's forfeiting roughly $80 million at a time when the state is facing a $1 billion shortfall in transportation projects.
Officials in Florida, New York and Missouri also have proposed gas tax holidays but they have yet to gain traction, according to the National Conference of State Legislatures.
Others are moving in the opposite direction.
Minnesota's needs for infrastructure repair were highlighted by a bridge collapse last year that left 13 people dead. State lawmakers summoned enough votes to override a gubernatorial veto and boost the gasoline tax by 8 1/2 cents over five years.
In Connecticut, the gross receipts tax on gasoline entering the state will rise to 7.5 percent from 7 percent on July 1. That tax on wholesalers is expected to be passed along to consumers.
Florida, North Carolina and West Virginia, Kentucky and Maine are also seeing gas tax increases this year. Nebraska could see a gas tax hike as well, state officials there said.
In California, Illinois, Indiana and Michigan, the amount drivers pay in sales tax has been rising with the overall price of gas.
Adding to the problem, critics say, are the complex tax formulas some states use that automatically adjust for things like the price of gas or the consumer price index.
States should increase taxes for gasoline through their legislatures, not complicated formulas, said Phil Kerpen, director of policy for the Washington-based anti-tax group Americans for Prosperity.
"When you set tax increase on autopilot it takes away all accountability," Kerpen said.