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.