Fuel-efficient cars driving rising gas taxes
The growth of fuel-efficient and electric cars means Americans are paying fewer gas taxes. States, which use gas taxes to pay for road repairs and public transit, are raising taxes on about one in three drivers in America to make up for lost revenue.
A total of 13 states raised gas taxes Monday, at the start of their fiscal years. The biggest increase is in Illinois, where the state taxes jumped 19 cents a gallon — a 52% increase. Second is Ohio, where taxes jumped to 38.6 cents a gallon — up 10.5 cents from the previous gas tax.
In California, where average gas prices were already at the highest level nationwide, the state gas taxes rose 5.6 cents a gallon, about a 10% increase. That means the state now has the highest state gas taxes, passing Pennsylvania, which left its gas taxes unchanged.
The 10 other states that raised gas taxes on Monday are Connecticut, Indiana, Maryland, Michigan, Montana, Nebraska, Rhode Island, South Carolina, Tennessee and Vermont.
Most state taxes that fund road repair are part of a per-gallon gas tax. Although the more fuel efficient cars and electric vehicles can cause as much road damage as the older gas guzzlers, they can do so without paying as much in gas taxes.
“That’s going to be one of the challenges,” said Tom Kloza, global head of energy analysis for the Oil Price Information Service. “It may be gradual shift to electric vehicles, but states are going to have to figure out a new way to raise money.”
Some of the increases that take effect Monday will be barely noticed by drivers. For example, Michigan raised its taxes by only 0.1 cents.
But the widespread hikes are notable, said Kloza: “I don’t ever recall these many states raising gas taxes on the same day.”
The higher gas tax increases come on a day that wholesale gas prices are also up about 5 cents a gallon, pointing to even higher pump prices on the way. Easing global trade tensions over the weekend and an agreement by OPEC to extend oil production cuts combined to send wholesale gas prices higher.
“Most drivers are paying less for gas than they were a year ago at this time,” said Kloza. “We’re going to see that start to change pretty quickly.”
The federal gas tax of 18.4 cents a gallon hasn’t changed since 1993. President Donald Trump has suggested he might be able to support an increase in the federal gas tax to pay for infrastructure repair, but Congress has not yet moved to do so.
The state increases are coming at the peak of the summer driving season — when gasoline demand is strong. That means most gas station owners will pass on the full amount of the increase directly to customers, Kloza said. They may have to swallow increases that come at times of low gas demand, such as New Year’s Day.
While few drivers like higher gas taxes, 57% of California voters last year voted to keep a series of annual gas price increases expected to raise $54 billion over 10 years. Supporters of the gas tax convinced voters that the hikes were needed to pay for road and bridge repair.