The High Price of Raising Low State Gas Taxes

As we noted in a post about the 25-cent wholesale tax hike proposed by N.J. Democratic Assembly Deputy Speaker John S. Wisniewski, the Garden State's 14.5-cent gas tax is second lowest in the nation.

On a regional basis, Maag writes that "(t)he closest nearby price competitor is Delaware, where the gas tax is more than double at 23 cents. New Jersey’s other neighbors — Pennsylvania, Connecticut and New York — charge gas taxes that are four or five times higher."

• However, there are consequences- political and financial, to raising gas taxes, the most obvious was on display on Nov. 4 in Pennsylvania where "Republican Gov. Tom Corbett lost his bid for reelection [the only Republican governor to do so.] His signature achievement: a nearly 30 cent increase in the gas tax."
• In Delaware, Gov. Jack Markell has been unsuccessful in pushing a gas tax increase. "Instead, lawmakers agreed to raise $30 million for paving projects by borrowing money and increasing weekend tolls on a state highway," writes Maag.
• In Connecticut, which has an indexed wholesale gas tax to inflation, the "tax hike(s) may have worked a little too well, however," notes Maag. "As the state faced mounting budget problems, elected officials repeatedly raided the transportation fund, eventually diverting $1.27 billion to other purposes, according to CT Mirror, a non-profit journalism website."
• In New York, with the highest gas tax in the nation at 50.5-cents [PDF], "also faces the biggest transportation funding crisis in the region," writes Maag. "The Metropolitan Transportation Authority announced in October that its five-year, $32.8 billion construction budget faces a $15 billion funding gap, which could jeopardize mega-projects such as extending the Second Avenue subway, said Veronica Vanterpool, executive director of the Tri-State Transportation Campaign."

Of course, the drawbacks to not raising the gas tax are also considerable, as New Jersey is experiencing. We noted earlier that "New Jersey's transportation trust fund is so broke that by next fiscal year, all of it will go toward debt payments."

Maag's piece is a good reminder of how difficult it is to raise gas taxes, and that higher gas taxes are no guarantee of "problem solved."