The recent rise in gasoline prices has many people complaining about the financial burden. Some states, including Georgia and Maryland, have sought to reduce prices by waiving fuel taxes for certain periods of time. Many Texans are calling on our state officials to do the same.
The reduction could be significant, as both state and federal taxes are imposed on fuels — not only on gas and diesel but also on natural gas, so those who fit their vehicles to run on propane or butrane aren’t spared.
Gas prices largely are governed by market forces and governments can’t restrict them, even if they do contribute to their causes. The U.S. embargo and Russian oil and other products has reduced global supply, but the demand already was increasing and magnifies that reduction. Spring is here and the COVID-19 pandemic is easing, and more people are returning to work and traveling.
Drivers in Texas already are fortunate to have one of the nation’s lowest fuel tax levies, at 38.4 cents per gallon for gasoline and 44.4 cents for diesel. Commercial vehicles pay even more taxes based on their use or routes; truckers who cross state lines, even into Mexico, for example, must pay special interstate and international fuel taxes.
The taxes are placed on volume, so the amount of tax paid on a 10-gallon purchase will be the same whether the pump price is $3 or $4 a gallon.
Lower taxes generally are welcome, but as always proponents need to recognize that lost revenue can mean lost services. Thus, officials should weigh the benefits of lowering fuel costs for their constituents against the cost of providing resources and services to those same constituents down the line.
Most fuel taxes are earmarked for special purposes. Of the federal taxes, 84.5% is dedicated to highway construction and maintenance; 15% subsidizes mass transit and 0.5% funds mitigation and cleanup of hazardous waste. Three-fourths of Texas gas taxes also support road projects, while the other 25% goes into the public school fund.
Waiving the gas tax thus would stop or delay road projects, and even reduce allocations for Texas schoolchildren.
Many people will argue that because the majority of fuel tax is in effect a use fee — providing better roads for drivers — such a tax is more justified than many other levies, and uses, of government taxing authority.
Are such losses worth temporary relief at the gas pump? Does a majority of Texas residents want lower gas prices enough to accept those losses, or do they accept the fact that because the taxes are based on use and not price the benefits are limited, and do they believe that the benefits of better roads and increased school funding are worth the added cost?
Texas officials would be wise to investigate the issue, weigh the pros and cons of offering temporary tax relief against the costs to driving-related funds, and gauge public opinion on the matter if possible. Either choice will be welcome to some, and criticized by others.
Public input surely will be welcomed, and many Texans would appreciate the chance to make their preferences known. Meanwhile, we can all hope that Russia’s aggression and other factors that are driving up fuel prices are short-lived.
