Breakout

Politicians Are Looking to Raise Prices at the Pump Says Gasbuddy.com Analyst

Breakout

The Federal gas tax is currently $0.18 per gallon and has been since 1993. Factoring in varying state government taxes, the national average for gas taxes and fees is $0.49 a gallon, making the U.S. the lowest gas taxpaying industrial nation.

With soaring debt, rising government spending and the Fiscal Cliff looming at the end of this year, there's growing speculation that State governments could target the gas pumps to gain some revenue to go towards infrastructure funding. It's a battle that no politician wants to take on directly because even the smallest increase tends to ignite the driving public.

"We're not paying a little extra, we're paying a lot extra," says Patrick DeHaan, sr. petroleum analyst at Gasbuddy.com about the current gasoline tax levels. "As CAFE standards are increasing fuel efficiency, we're having to find tax revenue from additional sources. Raising the gas tax may be something the politicians look at doing here."

The more Americans opt for fuel-efficient cars like the Toyota (TM) Prius, Nissan (NSANY) Leaf, Chevy Volt, and new Ford (F) Fusion, the less they're spending on gasoline. Consequently the revenue hit the government is taking is two-fold. Not only are the taxes generating less revenue, the production of fuel-efficient cars is subsidized and incentivized by the government.

"Not only are governments hurting for revenue, but they may be divvying up the portion that is for roads and putting it in a general fund," he explains. "We've seen [State] governments now interested in looking at different avenues for gas tax."

One option garnering attention is adding a mileage-based user fee.

"Several branches have talked about now charging per mile based on how much you drive; instead of gasoline tax, a usage-based system that would penalize those that use roads the most," says DeHaan.

This seems the fairest of them all; the more you drive, the more tax you pay that goes towards fixing roads and infrastructure. The drawbacks here are that drivers would likely face larger lump sum tax bills and it's difficult to track mileage accrued. The government can track your odometer, but that would likely invite an uptick in odometer tampering. Plus, they can't track whether you're traveling within your home state or across borders, unless of course there's a GPS monitoring your every move.

"You may see sales tax being added to gasoline because in some States that's easier than increasing a tax; just slapping a sales tax in addition on gasoline," says Dehaan.

Some states charge an actual sales tax, while others do not. Right now, state fees and taxes vary widely. Accounting for Federal and State taxes and fees, New York leads the country imposing 69.6-cents onto each gallon of gasoline, while Wyoming has the lowest 32.4-cents, according to gaspricewatch.com.

"The States got a bit smarter, they are charging a percentage-based sales tax," says Dehaan. "Whenever gas prices go up, States win. It's their cash cow. Look for the Feds to try something similar, but it's not going to go over very well."

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