February 20, 2018

Bloomberg: Why Gas Taxes Aren’t Paying the Bills Anymore

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A big part of the ups and downs in the above chart has to do with ups and downs in the price of gas, and this volatility is one reason why gas taxes generally aren’t levied as a percentage of the price. Many states switched to percentage taxes during the oil crises of the 1970s and early 1980s, and they came to regret it when gas prices subsequently plummeted. There are ways to structure a gas tax that would increase with overall inflation but not jump around with every gas price move — the Institute on Taxation and Economic Policy lays out the details of one such proposal here, if you’re interested. Also, it is politically possible simply to raise the gas tax, as a majority of states have done in the past four years. President Donald Trump reportedly surprised lawmakers at a meeting Wednesday by saying he would support a whopping 25-cent gas tax increase. Read more