As oil prices slide, states tack on taxes to boost revenues
Boston — World oil prices are falling. But motorists may not see the full price drop reflected at the gasoline pump. The reason: Many states are seizing the opportunity to tack on higher motor fuels taxes. So the drop in oil prices may be somewhat offset by a larger state bite of their gasoline dollar.
But they can take some consolation from the fact that their added nickels, dimes, and quarters may be buying better roads and safer bridges.
Total motor fuel taxes netted states more than $10.2 billion in 1981, and federal highway officials estimate that the amount was even larger in '82. States count on revenues from gasoline taxes to make much-needed repairs on roads and bridges.
And the question of gasoline taxes has become all the more critical for states because when the federal nickel-a-gallon gasoline tax hike to fund highway and mass-transit projects takes effect April 1, they will have to come up with matching funds.
But some states are worried about falling gasoline prices, specifically those states where motor fuel taxes are tied to a percentage of a fuel's wholesale or retail price. The falling revenues are not only caused by lower oil prices. Fuel conservation brought about by the increased use of smaller, more fuel-efficient vehicles also has been reducing the amount of highway funds raised through motor fuel taxes.
Lawmakers in at least two states - Rhode Island and West Virginia - have, in recent weeks, raised their motor fuels taxes. Similar measures are being weighed reluctantly or soon will be under consideration in at least half of the other states.
Florida legislators have been called into special session by Gov. Bob Graham to deal with highway funding problems.
A combined total of more than 30 proposals are already on legislative dockets in at least 15 states to up the revenue from gasoline sales. It's uncertain how any of these proposals may fare, but it's expected that several will pass - some fairly soon.
The North Dakota House of Representatives has approved a 5-cent-a-gallon hike in the state's current levy. The legislation, now pending in the Senate, would be the first increase of its kind there since 1977. In contrast, most of the other states considering plans to raise more highway funds have already increased their gas tax in recent years. Two-thirds of them were among the 26 states where levy boosts were enacted during 1981 and '82.
Critics of bills to raise motor fuels levies contend that taxes in most places already are too high. They argue that it's unfair to hit motorists with higher taxes at a time when the federal gasoline tax is about to go from 4 cents to 9 cents a gallon and other road user fees are being boosted.
Because of this, several of the proposals call for indexing the rise or fall of levies on gasoline to factors such as gas prices, the consumer price index, or highway construction costs. Also increasingly popular appears to be use of an add-on sales tax, or special excise levy, along with a cent-per-gallon tax, notes Catherine Yoe of the Highway Users' Federation.
Kentucky, one of four states with adjustable gas-tax rates tied exclusively to price, increased its rate from 9.5 percent to 10 percent last year.
The newly enacted Rhode Island law calls for a shift from the current levy of 10 percent of wholesale price to 11 percent, adjusted semiannually. In no case, however, could the latter amount to less than the equivalent of 13 cents a gallon.
The remaining two states, Massachusetts and Washington, have proposals pending to either increase their percentages or shift to a different arrangement , such as a cent-per-gallon basis.
West Virginia's new measure imposes a 5 percent sales tax on the wholesale price of motor fuels added on to the current 10.5-cent-a-gallon gas tax.
Other states considering gas-tax increases include Alaska, Colorado, Idaho, Maine, Minnesota, Missouri, Montana, New Jersey, New Mexico, Oregon, Vermont, Virginia, and West Virginia.
One of Alaska's proposals would retain the present 8-cent-a-gallon levy but add an additional 10 cents from May through October.
In Florida, a bill is being proposed that would replace half of the current 8 -cent-a-gallon gasoline levy with a 5 percent overall sales tax.
Vermont, which last year imposed its first diesel fuel levy, at 14 cents a gallon, is considering raising its 11-cent-a-gallon gasoline tax by three pennies.
The biggest proposed increase thus far is a 7-cent-a-gallon, three-year boost in Washington state's levy, already at 12 cents a gallon.
Colorado legislation calls for a three-stage, 6-cent increase in the current 9-cent-a-gallon gas tax. A 5-cent hike is proposed in the Maine gas tax, which is currently 9 cents a gallon.
Missouri legislators are considering a new 3 percent wholesale sales tax on top of the present 7-cent-a-gallon gasoline tax. A measure approved there last year, calling for a doubling of the per-gallon levy, was rejected by the voters on the November election.
Nine states currently have sales taxes on top of cents-per-gallon fuels levies. They are California, Georgia, Hawaii, Illinois, Indiana, Michigan, Mississippi, Nebraska, and New York. Two other states - Pennsylvania and Virginia - impose special excise taxes besides their gas taxes.
Motor-fuel taxes range from 5 cents a gallon for gasoline and 6.5 cents a gallon for diesel fuel in Texas to 14 cents a gallon for gasoline in the District of Columbia and New Hampshire and 15.5 cents a gallon for diesel fuel in Iowa.
The average per-gallon levy is 10.3 cents for gasoline and 10.5 cents for diesel fuel.
States increasing taxes on motor fuels in 1982 were Arizona - 5 cents over a three-year period; Idaho - 1 cent; Kentucky - equivalent of a half cent; Maryland - 5 cents over three years; Michigan - 2 cents through switch to an indexing system; Vermont - imposition of a new 14-cent levy on diesel fuel; and Virginia - addition of a 3 percent wholesale excise tax.