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A Progressive Gas Tax?

One of the criticisms of gas taxes is that it is regressive, i.e., everyone pays the same per-gallon price. A Mississippi legislator has a solution: Eliminate the income tax on the lowest income bracket in exchange for hiking the gas tax 12-cents.
February 5, 2018, 11am PST | Irvin Dawid
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Paul Latham

A year ago, the Institute on Taxation and Economic Policy (ITEP) pointed to Mississippi as one of a dozen states that would debate increasing its gas tax, fourth lowest in the nation after Alaska, Oklahoma, and Missouri. The 18.79-cents per gallon gas tax was last increased over 30 years ago.

"Mississippi is in dire need of revenue to repair and maintain its crumbling roads and bridges, but there are doubts that the legislature can come to agreement on a fix despite two obvious options: raising the state's outdated gas tax or repealing last year's misguided tax cuts," wrote Meg Wiehe (posted here). More on those '"misguided tax cuts" below.

While Mississippi was not among the eight states that successfully increased their state gas taxes last year, the effort continues, with the latest proposal coming from House Transportation Committee Chairman Charles Busby, a Pascagoula Republican, reports Jeff Amy for the Associated Press on Feb. 1

His proposal would phase out income tax on the lowest bracket, those earning between $5,001 and $10,000, over four years, costing the state $165 million in lost income.

In return, the gas tax would be raised by 12 cents, and the 18.40 cents-per-gallon diesel tax hiked by 15 cents, both phased over four years. New revenue would amount to $302 million. Fuel taxes would also be adjusted for inflation.

However, this isn't just a dollars to dollars comparison with the fuel tax looking like a winner, because revenues go to and come from different funding pots.

The state's general fund loses $165 million while the Department of Transportation gains $302 million, and that has Sen. Hob Bryan, D-Amory, a supporter of hiking the gas tax, opposed, reports Bobby Harrison for the (Tupelo, MS) Daily Journal on Feb. 4.

“The problem is there is not enough money in the general fund to get by,” he said. “...Long-term we are not going to be able to maintain the core functions of government.”

The loss of general fund revenue is exacerbated due to the aforementioned "misguided tax cuts."

The Legislature already has passed about 50 tax cuts that will take more than $700 million (in today’s dollars) annually out of the general fund when fully phased in. Those tax cuts already have had a negative impact on the general fund of more than $300 million per year.

Busby's plan would also follow the path seen recently in many other states to ensure that motorists who pay little or no fuel taxes would pay for roads by applying new hybrid and electric vehicle (EV) annual registration fees, though the fees he suggests would break a record for being among the highest proposed, $150 and $300 respectively.

Hat tip to AASHTO Daily Transportation Update 

Full Story:
Published on Thursday, February 1, 2018 in Associated Press
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