Gas-Tax Buying Power at All-time Low in Some States, Study Says
The gasoline tax is so low and has not been raised for so long in 10 states, that the levy’s purchasing power has fallen to historic lows, a new study said.
States where this has occurred are Alabama, Alaska, Delaware, Idaho, Iowa, Nebraska, New Jersey, South Carolina, Utah, and Virginia, said the report released earlier this month.
The study was conducted by the Institute on Taxation and Economic Policy, a Washington think tank.
To measure the buying power of each state’s gasoline tax, researchers used inflation factors and compared the
states’ current gasoline tax rates with the average gas tax rate levied in each state since its gasoline tax was first enacted.
“For example, while the 2-cent gas tax that Delaware levied in 1924 may sound extremely low to today’s drivers, in the context of the 1924 economy, it was actually higher than the [23-cent] tax rate Delaware levies today,” the report said.
A 2-cent tax in 1924 was roughly equivalent to a 27.8 cent tax today, the report said.
“Raising the gas tax in these states could reverse the long-running decline in their value brought about by inflation,” the study said.
But in such states, the tax rate “has been allowed to stagnate” for so long that to recoup the levy’s buying power the states would have to approve significant increases “just to restore the tax to its previous value,” the study said.
South Carolina, for instance, would have to triple its 16-cent gasoline tax to come close to recovering what it has lost in buying power, the study said.
Carl Davis, the senior policy analyst who handles fuel-tax issues at the institute, said researchers will look at state diesel taxes in the future.
“We’re still working on compiling a full history of every state’s gasoline and diesel tax rates,” Davis said. “Once that happens, we’ll be in a better position to do these kinds of analyses for diesel fuel as well.”
