Effort Underway to Halt Pennsylvania's Gas Tax Increase

The November 2013 legislation, signed by former Republican Gov. Tom Corbett, resulted in one of the largest state gas taxes increases in history, predicted at the time to be up to 28-cents per gallon, yet it actually eliminated the state excise tax. The tax increase was based on the elimination of the inflationary cap on the oil company franchise tax.

"As a result, the gas tax has increased nearly 20 cents per gallon from 32.3 cents in 2013," reports Keith Goble, Land Line state legislative editor "Over the same time the diesel rate has increased about 26 cents from 39.2 cents."

On Jan. 1, 2017, an increase of as much as 10 cents is anticipated.

Enter Rep. Joseph Petrarca, D-Westmoreland, who introduced "HB 2248 which would cancel the statutorily required January increase, keeping the wholesale price level, effectively preventing future tax increases based on the formula."

The oil company franchise tax differs from other wholesale fuels taxes that are sales tax-based that have experienced large revenue decreases due to gas price drops, e.g. North Carolina, Kentucky. The franchise tax is "based on a gallon of fuel and is determined by by the Department of Revenue on an annual basis beginning on every January 1," according to the Pennsylvania Bulletin.

Petrarca acknowledged in a press release that gas prices were falling, but explained that "there's a limit to how far the prices can drop because of the amount of state and federal taxes imposed on each gallon of gas."

Gas prices are largely determined by the volatile market factors of supply and demand, not gas tax changes which occur seldomly, generally in small amounts, and need not even be reflected in pump prices. On the other hand, gas taxes are the single most important factor in determining how much state funding is available for state transportation infrastructure and programs.

Hat tip: AASHTO Daily Transportation Update