Fuel tax increases for 2017 are likely to be more common than last year. At least that seems to be the recent trend for states with no major elections.
Here are some stats about states and their fuel tax increases patterns:
- About a dozen states are debating a 2017 jump.
- Alaska has not raised its gas tax in nearly 47 years and has the lowest levy in the country. It is considering tripling the tax from 8 cents per gallon (CPG) to 24 CPG over two years.
- Tennessee, which has not raised its tax in more than 27 years, is debating a 7-CPG increase to its 21.4-CPG gas tax.
- Others debating an increase are Oklahoma, Mississippi, and Louisiana.
According to information supplied by Carl Davis, research director for the Institute on Taxation and Economic Policy (ITEP), Washington, D.C., states were more active in changing their rates in the odd-numbered years of 2013 and 2015 but less so in the even-numbered years of 2014 and 2016. “If there’s not an election in November, then more policy seems to be enacted in general on taxes or other issues. Lawmakers feel like they have more breathing room; they don’t have to be campaigning at that moment.”
Adjusting their fuel tax allows states to devote funds to high visibility projects like filling potholes, which prevent the need for pesky car realignment, or expanding road networks, which can reduce traffic congestion. Those are the kinds of projects that Republican governors or a Republican-controlled legislature favor.
Bi-partisan fuel tax increases often get support from the business community as well. Although a higher tax can raise the cost of shipping goods, improvements to the transportation infrastructure can increase businesses’ profitability. For example, less road congestion means that businesses can achieve delivery goals. “When states are confronted with raising taxes, letting infrastructure deteriorate or transferring money from education and health to fill their infrastructure funding gaps,” Davis says, “many states fall on the side of raising taxes.”
Another incentive to inspire states to raise their fuel tax is that U.S. gasoline prices are expected to stay relatively low for 2017. That fiscal environment gives states the opportunity to recoup lost footing because their flat CPG tax has lost spending power over time through inflation.
According to ITEP, 30 states and the federal government have fixed-rate gas taxes. More than 20 states have not raised their rate in at least a decade, and 16 have not made a change in two decades. The federal tax, meanwhile, has not changed from 18.4 CPG in more than 23 years.
“If you go back to 2013, we’ve seen a significant group of states—19—enact gas-tax increases or reforms of some type. In many cases, these are states that have gone years or even decades without adjusting their fuel-tax rates,” says Davis.