House gasoline tax proposal would hurt most when prices are highest

Legislation passed by the state House would increase the tax burden on Mississippi drivers as the price of gasoline rises.

That cruel reality, which would be especially onerous for low income Mississippians, is a simple fact of how a sales tax works.

Mississippi’s current tax on motor fuel of 18.4 cents per gallon is the second lowest in the nation.

Transportation officials and others say the state needs additional revenue to pay for the ever-increasing costs of building new roads and bridges and maintaining the existing transportation system.

It is not surprising that both chambers are responding to those concerns of the need for more funding for transportation.

But the leaders of the two chambers are taking very different approaches to increasing the tax to pay for transportation needs. Senate leaders, led by Lt. Gov. Delbert Hosemann, are proposing increasing the tax 3 cents per gallon for three years until it caps out at 27.4 cents per gallon – which would still be lower than the gasoline tax in most states.

The House proposal would move Mississippi out of the mainstream of how states levy taxes on gasoline. The House, led by Speaker Jason White and Ways and Means Chair Trey Lamar, has passed out of the House legislation to impose a 5% sales tax on the cost of each purchase of motor fuel, both diesel and gasoline.

Simply put, the Senate plan taxes a gallon of gas. The House proposal places a tax on the cost of a gallon of gas.

For instance, a tax of 5% would be added to the purchase of $40 of gas. The Senate plan, when fully enacted, would add 9 cents to each gallon of gas – whether the gallon cost $1 or $5.

Only 10 states levy a sales tax on gasoline, according to the Tax Policy Center.

Already, the gasoline tax increase proposed by the House is higher than the Senate plan would be when fully enacted. According to AAA, the average cost of a gallon of gasoline in the state is currently $2.67, meaning Mississippi drivers would be paying about 13.4 cents more per gallon than they are paying now if the House tax hike is enacted. Drivers of diesel vehicles would be paying an extra 16.5 cents per gallon since the average cost of a gallon of diesel is currently $3.31 cents per gallon.

Remember, that tax would be in addition to the 18.4 cents already levied on a gallon of motor fuel.

Under the House plan, as the cost of gasoline increases making it more difficult to afford, the tax levied by the state also would increase, creating a double whammy. The double whammy would be exacerbated in a state with a large rural population often driving long distances to work. The average commute time in Mississippi is 25.2 minutes.

Despite that hardship, there is some logic to the House plan. The 18.4 cent per gallon tax on a gallon of gas has been in effect since 1987. Since that tax was imposed, vehicles have become much more energy efficient, meaning less gasoline is being purchased resulting in the revenue collected from the 18.4 cent-per gallon tax decreasing over time when adjusted for inflation. A sales tax most likely would ensure the revenue generated would not be static.

To offset the lost revenue from a tax on a gallon of gas, some states have tried to impose a tax based on the miles driven.

In the past fiscal year, the 18.4-cent per gallon levy generated $440 million in revenue with the bulk (71%) going directly to the state Department of Transportation for road and bridge construction.

Both chambers are proposing increasing the tax on motor fuels while reducing other taxes. The House would totally eliminate the income tax and reduce the tax on groceries while increasing the sales tax on most retail items by 1.5 cents. The Senate wants to reduce both the income tax and the tax on groceries.

As lieutenant governor, current Gov. Tate Reeves blocked all efforts to increase the tax on motor fuels to pay for transportation needs.

As governor, Reeves badly wants his legacy to be the elimination of the income tax. He calls it his No. 1 priority.

Whether he would sign legislation increasing the tax on gasoline in exchange for the elimination of the income tax is questionable. On social media, though, he has expressed support for the House plan to eliminate the income tax while increasing the gasoline tax and the sales tax on most retail items.

Whether such a tax swap would benefit the working poor, who comprise a large portion of the Mississippi population, is debatable.

This article first appeared on Mississippi Today and is republished here under a Creative Commons license.

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