Why These States Are Raising Their Gas Taxes

Why These States Are Raising Their Gas Taxes

 

Federal funding for transportation infrastructure is set to expire on July 31st. Although Congress still hasn’t come up with a long-term, sustainable solution, lawmakers passed a patch fund in May of this year that will be depleted by December. Some states have taken matters into their own hands. New Jersey will be the seventh state to implement a gas tax hike, which will increase the total to about 36 cents per gallon.

The Past and Future of the Highway Trust Fund

The future of federal funding for the Highway Trust Fund (HTF) continues to look bleak. While some lawmakers have offered to consider a federal fuel tax raise, those on the other side of the fence have strictly stated that they will not consider a hike.

The HTF is currently in a state of crisis. Since the 1930s, federal gas taxes have fed the HTF, which pays to repair bridges, roads, and other infrastructure elements of our nation’s major roadways. However, the tax hasn’t been raised since 1993 and increasing inflation has almost completely depleted the fund.

Additionally, improvements in fuel efficiency have decreased the amount of funding coming in. Currently, the government spends upwards of $50 billion each year on road projects, but the gas tax only brings in about $34 billion, leaving a $16 billion shortage. What’s more, government spending alone still isn’t enough. It would take an estimated $120 billion per year just to keep up with the current state of roadways.

Lawmakers have tried to secure funding in other ways, but the small “patches” are hardly enough to keep up with the deficit. This shortfall has resulted in many states pulling important construction and bridge repair projects. Although Congress has passed a temporary extension of funding to the HTF, it has only bought a few months. Until Congress comes up with a long-term solution, it seems that the HTF is on its own to secure funding.

Seven States Raise Gas Taxes

In response, several states have enacted their own fuel tax hike. New Jersey is the most recent state to join the movement, with a proposed increase of four cents to the wholesale petroleum tax. Currently, New Jersey drivers are charged 14.5 cents per gallon of gas. The levy on wholesale petroleum will be on top of the new tax rate of 18.4 cents per gallon.

Overall, New Jersey drivers can expect to pay a total of almost 36 cents per gallon: still one of the lowest rates in the U.S. Six other states implemented a tax hike on July 1st of this year, including Idaho, Georgia, Maryland, Rhode Island, Nebraska, and Vermont. New Jersey will be the seventh state, should they decide to increase taxes. The goal of increasing gas taxes at a state level is to provide evidence to the government that a federal tax hike is feasible. The relief will be felt on a government level as well. This is an important step that is not only feasible, but necessary to secure the future of the Highway Trust Fund.

Source:

http://thehill.com/policy/transportation/248470-new-jersey-considering-4-cent-gas-tax-hike

http://www.wsj.com/articles/new-jersey-weighs-higher-gas-taxesto-replenish-transportation-fund-1437353700

http://www.zerohedge.com/news/2015-07-01/these-six-states-just-raised-their-gasoline-tax

http://www.aatac.co/no-federal-gas-tax-hike-mcconnel

http://money.cnn.com/2013/02/12/news/economy/infrastructure-spending/

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