Is your state next to raise its gas tax?
New Jersey is poised to become the 19th state since 2013 to raised or reform its gasoline tax if, as expected, Republican Governor Chris Christie approves the just-approved 23-cent hike. More than a dozen states have considered similar moves over the past few months as they scramble to fix their crumbling transportation infrastructure.
Raising the gas tax has been a hot-button issue in New Jersey as it has been in other states. To gain Christie’s approval, the Democrats. who control the legislature, paired it with a decrease in the sales tax and a phase-out of the estate tax. Even with the gas tax hike, New Jersey gas will still be cheaper than fuel in neighboring New York and Pennsylvania.
As in the Garden State, local transportation officials are being squeezed by a combination of trends that has seen revenue from gas taxes plummet in recent years, leaving their transportation networks in disarray. First, cars are using less gasoline now, thanks to improved fuel efficiency standards. Fuel sales have also been hurt by the growing numbers of electric, hybrid and other alternative fuel vehicles.
Furthermore, most states don’t index their gas tax to inflation, and as a result, their funding for roads, bridges and public transit hasn’t kept up with rising costs for labor among other things. Efforts to raise the federal gas tax have also gone nowhere in recent years.
“There has been a push from various groups to increase user fees at the federal level,” said Kevin Pulla, of the National Council of State Legislatures. “It fell on deaf ears. Legislators on the Hill have said it’s a nonstarter.”
Time is another problem.
Many states have dragged their feet on raising the gas tax. New Jersey last increased it 26 years ago. Alaska, whose Independent Governor Bill Walker proposed a hike in July, last increased it 46 years ago. Alabama lawmakers failed to pass the state’s first increase in 24 years during its most recent legislative session as did lawmakers in Tennessee, which hasn’t changed its gas tax in 27 years.
“There has been a lot of procrastination,” said Carl Davis, research director of the Institute on Taxation and Economic Policy. “It’s an issue that the states cannot put off any longer. There are 21 states which have gone a decade or more since the last time they increased their gas tax rate. These states have some catching up to do.”
The issue isn’t going away anytime soon
Alabama’s increase will be reintroduced in the legislature next year, said Sonny Brasfield, executive director of the Association of County Commissions of Alabama, who supports the idea.
Tennessee Republican Gov. Bill Haslam plans to push for an increase in next year’s legislative session, according to local media reports.
Minnesota Democratic Gov. Mark Dayton wants a gas tax increase as part of a “robust” transportation plan, though the Republican-controlled legislature has stymied his efforts.
California Democratic Gov. Jerry Brown favors a 6-cent hike, while two legislators recently proposed a 17-cent raise.
Here’s something to consider: All these gas tax increases aren’t likely to be enough to keep roads funded in the future considering that fuel economy standards are due to hit 54.5 miles per gallon in 2025, which will lead to a further decline in gasoline sales.