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Slash state gas tax

Slash state gas tax

You already pay a surprising amount to the state whenever you fill up your tank
Slash state gas tax

Gas is getting more expensive.

After hitting a low of $1.88 in February 2015, the price of regular gas in the Capital Region has been on a relatively steady rise.

In March 2018, this price increase began to accelerate.

As of the writing of this column, the average cost of a gallon is about $2.97. 

If the price at the pump goes much higher, economists agree it’ll have a chilling effect on economic activity.

Faced with paying more to fill up, people will cut back on travel or else reduce other discretionary spending.

Moreover, as gas prices rise, so will the cost of virtually all goods and services. None of this is good for consumers, businesses or people looking for work.

The reasons for the gas price surge are largely global in nature. But that doesn’t mean Albany is powerless to help New Yorkers.

In fact, there’s something our lawmakers could do tomorrow if they’d like: They could slash our unusually high gas tax.

STATE TAX IS VERY HIGH 

You already pay a surprising amount to the state whenever you fill up your tank.

Depending on your locality, your state and local fuel taxes amount to about 44 cents per gallon.

If you use 600 gallons of gas each year (a middle-ground estimate), you pay around $260 a year to the state, just for gas. 

Much of that money goes to the general state coffers.

A portion of it goes to the Dedicated Highway and Bridge Trust Fund, which is supposed to be used for road and bridge upkeep, but is consistently drained for other purposes. According to the state comptroller’s office, only about 20 to 25 percent of the fund is used for its original purpose. 

Even with a perfectly functioning fund, there’s a bigger problem with gas taxes: They’re inherently a drain on our economy.

Excises on specific products like fuel are a popular way to raise revenue, but they naturally discourage consumption of the items being taxed.

Since gas is a critical part of our entire economy, taxing it disincentivizes virtually all forms of commercial activity.

That’s still not the worst part.

Like all flat consumption taxes, the gas tax disproportionately burdens the poor and middle class — i.e., an extra $260 in taxes means a lot more to someone making $52,000 a year than someone making $520,000.

A regressive tax like this thereby cuts into the average person’s ability to participate in the consumer economy, hurting all of us down the line.

Some will say that if you don’t like the tax, you can change your driving habits in response. But that’s not possible for some people.

What if you don’t have access to mass transportation? What if the only way to get to work is by driving 20 miles – and you can’t carpool? What if you need to drive for business?

IMPACT ON STATE BUDGET WOULD BE SLIGHT

Fiscal hawks might also point out that the state barely avoided a $4 billion budget shortfall this year. Is this the time to cut off a revenue stream?

The thing is, the gas tax doesn’t even provide that much money for the state. In Fiscal Year 2017, New York collected $519 million from motor fuel taxes, which amounts to just 0.7 percent our total tax inflow. By contrast, the state collected $46 billion on personal income in the same period.

Cutting the gas tax would certainly make balancing the budget a bit more difficult. But we can surely make up the lost revenue in a better way, without hurting all economic consumption. 

For example, we could slightly increase taxes on multimillionaires, who spend a far smaller share of their pay on goods and services than someone living on a budget. This would impact discretionary spending far less than the gas tax already does.

We could also reinstitute a tax on certain stock transactions.

For instance, New York City’s Stock Transfer Tax is levied at just cents per share and would have brought in a whopping $13.8 billion in 2017. But it’s been 100 percent refundable since 1981. If the state retained just 4 percent of that money, we’d more than make up for gas tax collections.

We also could pick a variety of revenue streams and add a little bit to each on the margins.

We could cut spending, too, if need be. None of these options are great. But they’re all better than an extra charge on virtually every single form of economic activity.

Whatever paltry benefits the gas tax provides, it isn’t worth the cost to drivers or the public at large.

Let’s repeal it, cut taxes for almost every New Yorker, and buffer the economy from any future gas price shocks.

Steve Keller is a regular contributor to the Sunday Opinion section.

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