Fuel Taxes Could Offset Lower Prices

Posted January 2, 2015 at 4:06 pm

With oil producers continuing to flood the market as the new year begins, keeping crude prices low for the moment, estimating your 2015 fleet fuel costs is like taking a shot in the dark. How long will the glut continue? Will government view this as the right time to raise fuel taxes? Recent news reports indicate states may take advantage while Washington probably won’t.

The latter appears to be the case even though the federal highway program faces a funding gap. The program expires in May. Still, Rep. Bill Shuster (R-PA), chairman of the House Transportation and Infrastructure Committee, told the Associated Press on Dec. 29, 2014, that a hike in fuel taxes appears unlikely. The congressman also doesn’t expect to see any support for a vehicle mile tax. Instead, the Highway Trust Fund could receive a one-time infusion of revenue from corporate tax reform, or levies on oil exploration efforts, both offshore and on federal land.

Former Rep. Dave Camp (R-MI), who retired at the end of 113th Congress after chairing the House Ways and Means Committee, outlined the idea of funding highways through corporate tax reform. President Barack Obama also has advanced this approach.

However, MarketWatch forecast posted on Dec. 11, 2014, said that cash-strapped states are likely to consider motor fuel tax hikes to fund their road projects. The Institute on Taxation and Economic Policy(ITEP) agreed in a Dec. 23 blog.

On Jan. 1, Pennsylvania (9.8 cents per gallon), Virginia (5.1) and Maryland (2.9) implemented increases due to legislative action. North Carolina and Florida had 1- and 0.3-cent rises due to inflation. Five other states (Kentucky, West Virginia, Vermont, Nebraska and New York) had decreases ranging from 0.6 to 4.3 cents, as they tie their gas tax rates to the price of gas.

Of specific concern to launderers: whether diesel fuel taxes will rise in tandem with gas taxes. In North Carolina, for example, both are going up a penny. In Virginia, motor fuel tax varies with wholesale price: gas is getting hit with an additional 1.6% (the take is rising from 3.5% to 5.1%) while the state is keeping the percentage level (6) for diesel.