Shh! States are (quietly) raising their gas taxes. And some in the White House are considering it, too.


Despite the failure of Louisiana’s 17-cent gas tax increase proposal last week that would have levied as much as $500 million annually for road and bridge projects, a recent analysis by the Institute on Taxation and Policy found that as many as 24 states (as in one state shy of fully one-half of all the states in the Union) raised their state gas tax rate since 2013.  In 2017 alone, six states have raised their gas taxes, including the bleeding-heart liberal/tax-and-spend happy states of South Carolina, Montana, Tennessee, and Utah.

From the Tax Justice Blog:

2017 Enacted Legislation

  • California: A 12-cent gas tax increase and 20-cent diesel tax increase will take effect on Nov. 1, 2017. The new law also changes the formula that California uses to implement ongoing gas tax rate adjustments. Among those changes are a new provision allowing for gas tax increases based on the rate of inflation within the state’s borders.
  • Indiana: A 10-cent increase will take effect July 1, 2017. Further adjustments will occur between 2018 and 2024 based on a new formula that considers both inflation and the rate of growth in Indiana’s personal income. The new law also shifts the portion of sales tax revenue collected on gasoline purchases out of the general fund and toward transportation instead.
  • Montana: A 6-cent per gallon gas tax increase will be phased-in over 6 years. Most of the increase (4.5 cents) will take effect on July 1, 2017. The remainder will be implemented in 0.5 cent increments between July 1, 2019 and July 1, 2022. The state’s diesel tax will eventually rise by 2 cents, with most of that increase (1.5 cents) taking effect July 1, 2017.
  • South Carolina: The legislature overrode Gov. Henry McMaster’s veto to enact a 12-cent per gallon increase in the tax rate on both gasoline and diesel. The increase will be phased-in over 6 years, with the first increase (of 2 cents per gallon) taking effect on July 1, 2017.
  • Tennessee: The gas tax will rise by 6 cents and the diesel tax by 10 cents on July 1, 2017. While Gov. Bill Haslam initially proposed indexing the state’s gas tax rate to inflation, this reform was not included in the final package passed by the legislature.
  • Utah: A new law modifies the variable-rate gas tax formula enacted by Utah lawmakers in 2015 in a way that will allow for somewhat more robust revenue growth. The new formula is expected to result in a roughly 0.6-cent-per-gallon tax increase in 2019 and a 1.2-cent increase in 2020.

Sarcasm aside, the point is state legislatures (both Democrat and Republican controlled) are starting to take their infrastructure funding woes seriously.

Not to be outdone, it looks like the White House also wants in on the action.  Late last week, The Hill reported that Richard LeFrak, real-estate mogul and one of President Trump’s key advisors guiding his $1 Gazillion dollar infrastructure package, is also not not willing to explore the possibility of raising the federal gas tax.

From The Hill:

One of President Trump’s advisers says he supports hiking the federal gasoline tax to help pay for new roads and bridges — a politically fraught issue that Congress has avoided for years.

Richard LeFrak, a real estate developer leading a new White House council to vet infrastructure projects, told CNBC on Wednesday that he is “in favor” of increasing the gas tax, which hasn’t been raised in over 20 years.

The federal fuel tax is currently 18.4 cents per gallon of gasoline and 24.4 cents per gallon of diesel fuel.

“You’d be leveling it to where it would have been had they adjusted it for inflation in 1993,” he said. “If they did adjust it for inflation … it actually would produce tens of billions of dollars to annual revenue that would be reinvested.”

Obviously, there’s reason to be very skeptical. First, there’s the feat of getting a tax increase through a Republican-controlled Congress.  Furthermore, it isn’t even clear everyone in the White House is on the same page as Mr. LeFrak.  President Trump’s budget proposal released last month wasn’t exactly the boon to infrastructure funding most were hoping for, with some Democrats calculating it will reduce (as in the opposite of increase) overall federal outlays by $145 billion over the next 10 years.

Regardless of what the White House (and really Congress) decides to do, what does appear likely is continued action by state and local governments.  Infrastructure needs aren’t going away, and there’s a limit to what creative financing can do.  For now, at least, more state legislative leaders are making the calculation that funding their state’s transportation infrastructure is worth the heartburn they’ll get afterward.


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