Study: States overdue to increase fuel taxes

By Keith Goble, state legislative editor

A study released Dec. 14, 2011, reveals that states are missing out on hundreds of millions in fuel tax revenue.

The Institute on Taxation and Economic Policy’s analysis showed that state governments are losing out on more than $10 billion annually in transportation revenue. The nonprofit tax-policy group cited a failure by states to plan for inevitable increases in the cost of transportation construction.

State lawmakers are blamed for a reluctance to update fuel taxes that have cost their states, on average, $201 million in annual revenue. The study says the problem is worsened because the federal fuel tax has lost 41 percent of its value since it was last raised in 1993.

“Unfortunately, many politicians won’t consider touching the gas tax,” Carl Davis, senior analyst at ITEP and author of the study, said in a statement. “They are raising sales taxes, fees on vehicles, tolls on roads, even looting education funds, all to make up for the stagnant gas tax.”

Among the recommendations by the Washington, DC-based group to modernize fuel taxes is to increase rates. Appropriate rates for each state would depend on transportation funding needs as determined by lawmakers.

The long-term recommendation is to index fuel tax rates to inflation.

On average, states have not increased their fuel tax in more than a decade and 14 have gone at least 20 years without an increase.

According to the report, after adjusting for construction cost growth, the average state’s fuel tax rate has effectively fallen by 6 to 7 cents per gallon since the last increase.

States that have lost out on the most fuel tax revenues include Virginia, Maryland, New Jersey, Massachusetts and Arizona.

The Owner-Operator Independent Drivers Association remains committed to the fuel tax as the primary way to fund highways.

“OOIDA recommends the next federal highway bill contain a provision requiring that highway users be reimbursed for any state and federal fuel taxes they pay on miles driven on any existing toll roads or future toll roads,” Association leadership states in its list of highway funding principles.

“Tolls are taxes, and paying both tolls and fuel taxes amounts to double taxation.” LL