Tax collectors feel pain at the pump

Michael Giberson

For months we have been treated to media reports telling us gasoline consumption was undeterred by higher prices. Apparently, not any more. Prices have become high enough to reduce consumption, and because a reduction in gasoline consumption leads to a reduction in gasoline tax collections. State government officials are taking notice, according to the Washington Post:

In June and July, when prices started jumping and drivers started changing habits, total gas tax receipts dropped by nearly $1 million in Virginia compared with the same months last year.

The same was true in the District, where gas tax revenue dropped sharply in June, to a level nearly $1 million less than last year. June also was disappointing in Maryland, where taxes came in $1 million less than projected.

The article reports that the federal gas tax is 18.4 cents per gallon, Virginia charges 17.5 cents per gallon, the District of Columbia charges 20 cents per gallon, and Maryland charges 23.5 cents per gallon.

The situation is a little different in New York, one of nine states that charge a sales tax on gasoline (in addition to an 8 cent per gallon excise tax). As prices go higher, the sales tax brings in more revenue per gallon sold. A New York newspaper reports that the state Department of Taxation and Finance expects to bring in an additional $40 million in tax revenue due to higher gasoline prices.

The stories remind us to consider the effect of gasoline taxes when calculating “historic high prices” at the pump. Gasoline prices have been up and down over the past fifty years, but gasoline taxes have been mostly just up. The American Petroleum Institute reports current gasoline taxes by state (pdf file) as of July 1, 2005. On that date, they said, eight states increased gasoline taxes, while one (Nevada) showed a decline.


6 thoughts on “Tax collectors feel pain at the pump

  1. Gasoline taxes need to be increased to $3/gal, in order pay for the military cost of using imported oil.

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  3. Mike,

    How about starting a “pool” on how long it will take the rest of the states and the feds to change to variable motor fuel taxes based on wholesale fuel price? You don’t have to be the “brightest bulb in the string” to figure this out!

    Robert,

    Several politicians have suggested an increase of $0.50 per gallon over the past several years. (I don’t remember any of them having won anything as a result.) These suggestions apparently had very limited popular appeal.

    Many of these same politicians are now complaining about gas prices which are about that much higher. I guess their problem is that the additional money is not flowing to the federal government, where it could disappear down one of the many “rat holes” available to them.

    Perhaps some group of brave politicians, or politicians ready to retire anyway, could be induced to propose your suggested tax increase in Congress. It’s been a slow summer and Congress returns soon. Maybe we could sell tickets.

  4. I didn’t say it was a popular thing to do. I said it was the right thing to do.

    Our use of oil has poured cash into the middle east, which in turn has been used to foment islamo-nazism and terrorism, which has contributed to repeated attacks on the United States and interests and personnel abroad. Because of the security problems created by the middle east, we are in a war that has cost us and will cost us in the neighborhood of $200 billion.

    It seems right and proper to me to finance this war with a tax on the item that lies among its causal roots. The tax won’t end the war, nor will any stringency in the use of oil. But there is no point in putting ourselves into debt to fight this war.

    Raising the gas tax will pay for the war and reduce our dependence on imported oil.

  5. Eliminating “pork” would also pay for the war, but that would adversely impact the politicians rather than the people. We certainly can’t have that.

    Funny, I seem to remember a “temporary” tax put in place to fund the Spanish American War. A tax on telephone service, I believe. Hmmm.

  6. Eliminating “pork” would also pay for the war, but that would adversely impact the politicians rather than the people. We certainly can’t have that.

    Funny, I seem to remember a “temporary” tax put in place to fund the Spanish American War. A tax on telephone service, I believe. Hmmm.

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