July 2, 2013

CNN Money: Just in Time for the Holiday, 8 States Raise Gas Taxes

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(Original Post)

POSTED BY RYAN HOLEYWELL | JULY 1, 2013
Drivers hitting the road for the Independence Day holiday will encounter higher gas taxes in eight states, according to data compiled by Citizens For Tax Justice.
While the changes could frustrate drivers — if they notice the slight hikes — there’s a silver lining: many states only raised their gas taxes after going years without changing them at all. Lawmakers across the country say gas tax increases are needed to pay for important infrastructure work that would otherwise not occur without the extra revenue.
Gas tax increases are also largely viewed as a way states are responding to the federal government’s failure to find big, new sources of infrastructure funding. While eight states increased their gas taxes Monday, the federal gas tax has remain unchanged for 20 years.
The biggest gas tax hike Monday occurred in Wyoming, where overnight, it rose from 14 cents to 24 cents per gallon. The hike, a priority of Gov. Matt Mead, will bring in an extra $70 million annually for transportation projects.
Other states with gas tax hikes that took effect this week include:
Maryland, where gas taxes go up after the legislature earlier this year added a sales tax on top of the existing gas tax.
Connecticut, where gas taxes increase due to a 2005 law.
California, Kentucky, Georgia and North Carolina, where gas tax rates are pegged to the cost of gasoline, which is rising.
Nebraska, where the gas tax is tied to both the rising price of gasoline as well as the rising amount of state transportation spending.
There are 16 states total where gas taxes are tied to a mechanism to ensure they rise in concert with the base price of gas or inflation. Citizens for Tax Justice writes:
It seems that more states are finally recognizing that stagnant, fixed-rate gas taxes can’t possibly fund our infrastructure in the long-term and should be abandoned in favor of smarter gas taxes that can keep pace with the cost of transportation.
Meanwhile, two states will actually see their gas taxes drop. Vermont’s dips slightly due to a new formula adopted by the legislature earlier this year — but it comes on the heels of a six-cent hike that took effect immediately after the law was passed earlier this spring.
Virginia’s gas tax,meanwhile, plummets by more than 6 cents due a shift towards the use of sales taxes to fund infrastructure.

Drivers in eight states started paying a higher gas tax beginning July 1.

NEW YORK (CNNMoney)

Eight states increased their gas tax this week, according to a report from the Institute on Taxation and Economic Policy.

The largest boost was in Wyoming, which raised its gas tax by 10 cents a gallon, followed by Connecticut, California, Maryland, Kentucky, Nebraska, Georgia and North Carolina.

The increases went in to effect on July first.

“It’s a marginal increase,” said Ken Orski, publisher of the infrastructure industry publication Innovation NewsBriefs.

Meanwhile gas taxes in Virginia and Vermont went down.

“Some drivers in Maryland may fill up in Virginia as its gas tax went down. For other states, I don’t think the increase is noticeable,” Orski said.

Unlike state gas taxes, which have been fluctuating, the federal gas tax has remained unchanged at 18.4 cents per gallon since 1993, despite a 55% increase in the cost of road building over the last 20 years.

Therefore tax revenue keeps falling short and the federal government has to make massive cuts in infrastructure spending to fill in the gaps, said Carl Davis, senior analyst at The Institute on Taxation and Economic Policy.

State and federal gas taxes are mainly used for road building and other transportation infrastructure projects.

Raising the federal tax is politically unpopular since taxpayers may not see how their federal dollars are put to work. Meanwhile, state taxes are more prone to be raised because they’re more tangible. “[Taxpayers] understand better where the money is going,” Orski said.

Why U.S. infrastructure is lagging behind

Wyoming and Maryland’s legislatures voted to increase their gas tax, while the other states’ gas taxes are set to automatically go up every six to 12 months to keep pace with inflation. Currently 16 states automatically peg their gas tax to inflation.

“The increase is an indication that states have a heavier burden of investing in transportation since they don’t have enough funding from the federal government,” said Emil Frankel, a former transportation expert in the George W. Bush administration and now director of transportation policy at the Bipartisan Policy Center.

Davis said it’s a tough political challenge.

“Gas tax increases pale in comparison to gas price volatility. People are more sensitive to gas price changes,” he said.

 

 


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