Lawmakers in Many States Look to Suspend Gas Taxes

09/17/2005

By ANNE BERRYMAN
NY Times
Published: September 18, 2005

Lawmakers in more than a dozen states and the District of Columbia are requesting special sessions or are already weighing proposals to suspend gasoline taxes because of price surges attributed in part to damage to refineries from Hurricane Katrina.

The efforts to ease consumers’ burden at the pump have created worries about the adverse effects of tax cuts on state budgets.

“This issue has very much taken off,” said Arturo Perez, a fiscal analyst of the National Conference of State Legislators. But with most legislatures in recess, Mr. Perez said, “obviously, there will not be as much legislative discussion because there is no forum.”

The issue of tax cuts on gasoline or caps for gasoline taxes has been raised in Arizona, Florida, Georgia, Indiana, Michigan, Montana, Nevada, New Mexico, New York, North Carolina, Oklahoma, Pennsylvania, Utah, Washington State and in Washington, D.C.

In Congress, three Republicans, John Shadegg of Arizona, Phil English of Pennsylvania and Denny Rehberg of Montana, introduced a bill on Tuesday that would suspend the 18.4-cent-a-gallon federal gasoline tax for 30 days. Mr. Rehberg said the resulting $1.75 billion to $2 billion in lost revenue from the federal highway trust fund could be taken out of the general revenue.

Mr. Rehberg also asked Gov. Brian Schweitzer of Montana, a Democrat, to suspend the state gasoline tax for 30 days, saying the $13.5 million loss could be covered by the general fund. Governor Schweitzer refused, but said he would continue to press Montana’s oil refineries to be “good neighbors” and lower prices. Meanwhile, the state attorney general, at the governor’s request, investigated consumer complaints of price fixing by the companies.

“We’re looking at record profits at a time when people are paying record prices,” said Hal Harper, the state’s chief policy adviser.

If Montana cuts its gasoline tax, it risks losing federal matching dollars for highways, “critical infrastructure,” Mr. Harper said. He said the lost financing would not be easily covered by a general fund, which is already pressed by obligations, like a State Supreme Court order to increase public school financing and a state retirement program that is more than $1 billion in debt.

Every state, Mr. Perez said, levies an excise tax on gasoline, but amounts vary. Georgia has the lowest excise taxes at 7.5 cents a gallon, and Washington State has the highest, at 31 cents a gallon, according to the American Petroleum Institute. The federal government provides matching funds for federal highway improvements at an approximate rate of 80 cents for every 20 cents collected by the state.

In addition to the excise tax, nine states - California, Florida, Georgia, Hawaii, Illinois, Indiana, Michigan, New York and West Virginia - apply a general sales tax on motor fuel, Mr. Perez said.

And in some states, including New York, counties and cities can levy another sales tax.

On Sept. 10, after a special five-day session, the Georgia Legislature ratified Gov. Sonny Perdue’s moratorium on the state gasoline tax, about 15 cents a gallon, including an excise tax of 7.5 cents per gallon. Effective only until the end of September, the measure, which is expected to save Georgians $75 million at the pump, passed 164 to 6 in the House and 49 to 2 in the Senate.

Bart Graham, the Georgia revenue commissioner, said the state finished the 2005 fiscal year with a $61 million surplus in motor fuel revenue. “Nothing that was budgeted is at risk of being cut” by the moratorium, Mr. Graham said.

State Representative Nan Grogan Orrock, Democrat of Atlanta, who voted against the moratorium, said the extra revenue was an opportunity for better financing of health insurance for children and education and to help the state’s needy, whose numbers were increased by Hurricane Katrina. “We do not need to cut state revenues at a time when all our systems are going to be challenged to meet the needs of the storm victims who are relocating to Georgia,” Ms. Orrock said, adding, “People are sick of bogus tax cuts that further weaken government’s ability to do its job.”

In Oklahoma, voters on Tuesday soundly defeated a proposal that would have increased the gasoline tax incrementally by 5 cents to 22 cents per gallon. The referendum was placed on the ballot through an initiative petition signed by nearly 300,000 registered voters last year, when gasoline was considerably cheaper.

Two weeks ago, State Senator Mike Morgan, Democrat of Stillwater, asked Gov. Brad Henry, another Democrat, to extend a special session to consider a bill that would suspend the state’s 17-cents-per-gallon excise tax from Oct. 1 to Dec. 31, amounting to about $1 million per day in savings for consumers. The lost revenue, Mr. Morgan said, would be covered by Oklahoma’s $461 million “rainy day fund.” Constituents had complained about rising gasoline prices in the weeks before Hurricane Katrina hit.

“A lot of people who work in agribusiness and the energy industry sometimes don’t make as much as they need to support their families,” said Mr. Morgan, framing the conflict as one between the rural poor and the urban wealthy. “When fuel prices spike like this, they have to make choices that they shouldn’t have to make. Do we put gas in the car or do we eat?”

The governor has not acted on the proposal. But, Phil Bacharach, his press secretary, said Mr. Henry was “intrigued” but saw a number of questions, including whether savings would actually be passed along to consumers.