States weigh raising gas taxes to fill budget potholes

May 23 2011 - 2:44pm


Your pick: potholed roads or pricier petroleum.

Especially in states that have not raised gasoline taxes in years, these revenues

typically spent on transportation -- have dwindled. At the same time, inflation has cut into their purchasing power.

So, even as gasoline prices flirt with the $4.11 per gallon record set in July 2008, a handful of cash-strapped states are taking a look at raising gas taxes.

So far this year, Connecticut, Hawaii, Maryland and Nebraska introduced legislation hiking their gas taxes and Arkansas might boost its diesel fuel tax, according to data compiled by the National Conference of State Legislatures and the Tax Foundation. Conversely, Utah, Virginia and Wyoming already have shot down proposed increases this year, NCSL records show.

In July, Minnesota plans to begin testing technology that might enable shifting tax collection from gasoline sales to miles driven, the Minneapolis Star Tribune reported April 19.

The federal government has not raised the national gas tax of 18.4 cents since 1993, said Ian Parry, senior fellow at Resources for the Future, a nonprofit, nonpartisan group applying economics to environmental studies.

Because the federal tax hasn't kept up with inflation, the revenue created for federal transportation projects is "being eroded over time," Parry said.

Taxes, the third largest component of gas prices, play a major role in how much consumers pay at the pump. They also help explain wide price variances among states.

In California, motorists pay 47.7 cents per gallon in taxes -- the nation's highest rate, according to the American Petroleum Institute, which represents gas companies. Alaska has the lowest tax, charging 8.0 cents a gallon.

Alaska subsidizes its public transportation by taxing oil companies that drill there, said Mark Cooper, research director at the Consumer Federation of America, an advocacy group.

Some state budgets actually benefit from high gas prices. Those that impose a gas sales tax make more money as the price goes up. (The typical gas tax, or "excise" tax, is a flat tax based on the volume of petroleum sold, not the price.) Indiana hits consumers with a 7 percent sales tax on top of the state's 18-cents-a-gallon tax. It has collected an extra $202 million over the past year because of higher fuel prices, the Tax Foundation found.

John Felmy, the petroleum institute's chief economist, calls this kind of gas tax a "double whammy" because it hits consumers extra hard when gas prices are already up. On the flip side, states with gas sales taxes lose out on cash when prices fall.

Other states imposing a sales tax on top of a gas tax include California (2.25 percent), Illinois (5 percent) and Michigan (6 percent), the Tax Foundation reports.

(Contact reporter Isaac Wolf at

(Distributed by Scripps Howard News Service,


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