Six states raise fuel levy to fund transportation projects to make up for federal deficits.
According to the Citizens for Tax Justice and the Institute on Taxation and Economic Policy (ITEP), in an effort to replace federal transportation funding, six states will be raising the tax on fuel purchases. This tax increase goes into effect today, July 1, 2015 in Idaho, Georgia, Maryland, Rhode Island, Nebraska and Vermont as new laws take effect at the start of the states’ fiscal year. However, a seventh state, California, will be decreasing the fuel tax by six-cents-per-gallon.
A report by The Hill revealed that the federal government typically spends $50 billion per year on transportation projects, but with the current 18.4-cent-per-gallon federal tax that is paid by all drivers in the U.S., the gas tax will only bring in $34 billion annually. Due to this discrepancy, it has been estimated by the Department of Transportation that the Highway Trust Fund will run out of money by late July or early August.
The federal gas tax has been the main source of funding for transportation projects for decades, but the tax has not been raised since 1993, and although many states would be willing to raise gas tax, there are conservative groups who believe that raising the federal fuel levy would be considered a tax hike. With this dilemma, federal lawmakers are struggling to find a way to pay for an extension to the July 31 deadline to pass the federal transportation funding.
Rather than waiting for a decision from federal lawmakers, some states are moving to make up for the deficit on their own by charging an additional tax on top of the federal 18.4 cents-per-gallon. According to a report by The Hill, Idaho will be making the largest tax increase at seven-cents-per-gallon, followed by Georgia with a 6.7-cent increase. Maryland is expected to make a 1.8-cent increase, and Rhode Island will raise their fuel levy by one-cent-per-gallon. The smallest increases will be made by Nebraska, at 0.5-cent-per-gallon and Vermont at 0.35-cent-per-gallon.
