Six states raised their gas taxes on July 1 in order to help pay for transportation projects, but an ARTBA analysis shows actual retail prices at the pump mostly fell, in line with recent patterns. Residents of Idaho, Georgia, Maryland, Rhode Island, Nebraska and Vermont all saw their gas taxes raised at the July 1 start of the new fiscal year. The largest increase took place in Idaho, where the 7 cents-per-gallon hike was signed into law in late April, while Georgians saw their gas taxes go up by 6.7 cents-per-gallon. Other increases ranged from 0.35 cent-per-gallon in Vermont to 1.8 cents-per-gallon in Maryland.
The tax increases, however, did not translate to an actual penny-to-penny increase in the retail price motorists paid at the pump, keeping in line with a recent ARTBA analysis that shows only a percentage of the levy is passed on to consumers. Daily data from AAA showed the national average retail price of gasoline slid 0.5 cent from June 30 to July 1, while the largest of only two gains in state retail prices took place in Nebraska, where prices rose 0.3 cent. In Idaho, where the largest gas tax increase of 7 cents went into effect, prices rose just 0.2 cent, while prices in the other four states slumped on July 1.
On July 2, the national average retail price rose 0.4 cent, while the largest state gain in prices was 3.1 cents in Idaho, followed by 0.7 cent in Georgia. State prices in Maryland, Rhode Island, Nebraska and Vermont, however, fell from July 1 to July 2, and prices in all four states remained under prices from June 30, prior to the gas tax increases taking effect.
ARTBA’s recent “Pump Shock” study tracked the market impact of five state gas tax increases enacted in 2013, noting the retail price for a gallon of regular gasoline the day after, one month after and one year after a state gas tax increase went into effect. The research found that, on average, the price for a gallon of regular gasoline the day after a state gas tax increase goes into effect only reflects about 22 percent of the new levy. A month after enactment, only about a third of the levy shows up in the pump price. And, one year after enactment of a state gas tax increase, the average price for a gallon of regular had dropped, on average, 3.7 percent below the market price the day before the tax increase went into effect, larger than the drop in the average national retail price for the same time period.
According to the U.S. government’s statistical energy arm, the Energy Information Administration (EIA), the four factors that drive the retail pricing of gasoline are the price of crude oil, refining costs and profit margins, retail and distribution costs and profit margins, and taxes. The agency said the price of crude oil and refining costs and profit margins drive most of the variability in pump prices.
The July 1 increases are the latest in recent moves by states as they deal with uncertainty surrounding federal transportation funding, which faces a July 31 reauthorization deadline. This week Washington state approved over $1 billion annually in new revenue for the state’s transportation infrastructure, funded in part by an incremental 11.9 cents-per-gallon state gas tax increase. Washington became the seventh state in 2015 to increase their state gas tax.
While nearly 40 states have introduced measures relating to transportation funding so far this year, the federal Highway Trust Fund (HTF) still remains the source, on average, of nearly 52 percent of annual highway and bridge capital investments made by state governments. ARTBA continues to push Congress ahead of the July 31 deadline. The association’s “Getting Beyond Gridlock” (GBG) proposal would put the HTF back on sound financial footing with a 15 cents-per-gallon increase in the federal motor fuels tax that would be coupled with a 100 percent offsetting federal tax rebate for middle and lower income Americans. It would fund a six-year, $401 billion highway and public transit investment authorization and permanently eliminate the program’s $16 billion per year “funding gap” while allowing for new investments in the National Freight Network aimed at improving the movement of goods.