ATR Opposes House Bill 170's Massive Gas Tax Increase in Georgia

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Posted by Paul Blair on Tuesday, February 10th, 2015, 7:48 AM PERMALINK


In the aftermath of a joint legislative study committee report on transportation, Georgia lawmakers have spent the last month figuring out how to extract more money from taxpayers to pay for transportation projects. The report called for at least $1-1.5 billion in additional spending annually. To address “the full universe of transportation needs, including establishment of passenger rail systems,” the report claimed the state would need between $3.9 and $5.4 billion annually, constituting a 20 percent increase in the total state budget.

Georgia House Bill 170, which is supported by Republican Gov. Nathan Deal and House Speaker David Ralston, would raise at least $1 billion per year by making a number of changes to the state gas tax. Gasoline in Georgia is subjected to an excise tax of 7.5 cents per gallon, a 4% sales tax and in most places another local sales tax of 3%-4%. Under H.B. 170, this mix of taxes would be converted to a 29.2 cents per gallon tax, indexed to inflation. This is a tax increase that rises year by year. 

As Tom Crawford with the Gainesville Times noted, “the current mix of excise and sales taxes on gasoline totals roughly 27 cents per gallon.” By indexing the gas tax to inflation and increasing the tax by more than 2 cents per gallon, H.B. 170 is clearly a tax increase.

Drivers of hybrids aren’t forgotten. The bill imposes a car tax hike on alternative fuel vehicles of between $200-$300 per year, indexed to inflation. Virginia’s 2013 transportation tax hike did this as well until Democrat Governor Terry McAuliffe repealed the tax less than 6 months later.

H.B. 170 also engages in an inventive gimmick to generate $500 million in new revenue. By immediately absorbing local gasoline sales tax revenue, the state will now collect and spend money otherwise collected and spent by localities. Most localities spend this money on a bevy of non-transportation needs, like education. Absent the willpower to cut spending though, it is likely local governments will consider tax hikes in the future.

Upon the expiration of local sales taxes on gasoline, H.B. 170 permits localities to raise the local excise tax on gasoline by up to 3 cents per gallon before requiring that further gas tax hikes be approved by referendum for a maximum of 6 cents per gallon in local taxes. This sets in motion future tax hikes, not all of which even need voter approval.

While we take no position on the state absorbing local tax revenue streams, directing gas tax revenue to transportation projects instead of unrelated spending programs like education, should be applauded. In 2014, by a 80-20 margin Wisconsin voters passed a ballot initiative requiring gas tax revenue be spent on transportation. Consumers' expectations on gas tax revenue are clear: spend it on transportation and nothing else. Unfortunately, the definition of "transportation" is broad and encompasses a number of expensive projects, all of which may not actually alleviate traffic to improve anyone's commute to work. 

So what would the total gas tax bite be if H.B. 170 passed in Georgia? 

Tax Collector

Present Law

H.B. 170

Future

Total Tax Possible

Federal

18.4 cents/gallon

NA

NA

18.4 cents/gallon

State

7.2 cents/gallon + 4% sales tax

29.2 cents/gallon

Chained to CPI

*29.2 cents/gallon

Local

3%-4% sales tax

Up to 3 cents/gallon

Up to 6 cents/gallon

6 cents/gallon

 

45.4 cents/gallon

   

*53.6 cents/gallon

*Chaining the tax to inflation guarantees additional increases
Americans for Tax Reform opposes H.B. 170. Not only does the bill result in an immediate gas tax hike, it gives local governments free rein to raise local gas taxes in the future. The total tax on gasoline in Georgia could range as high as 53.6 cents per gallon, well above the U.S. average of 48.29 cents per gallon. If implemented, H.B. 170 could make gasoline sold in Georgia, the 9th highest taxed gasoline in the nation. Indexing the gas tax to inflation would make it worse. 
 

ATR urges the legislature to revisit its transportation spending priorities and reject all gas tax hikes on consumers. 

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