On July 1st, many new Georgia laws went into effect. Chief among them was the implementation of Georgia’s “Transportation Funding Act of 2015”. Additional tax dollars are now being collected to get the 4th fastest growing state in the country from being dead last in transportation infrastructure spending.
There remains much confusion about what this act does, and does not do. Among this confusion is how much the gas tax increased. The new taxation formula replaces a system where a fixed 7.5 cents per gallon was added to a 4% sales tax on the price of gasoline with a fixed 26 cents per gallon tax. The net result was a change from the 19.3 cents per gallon collected in June, or an increase in 6.7 cents.
Other revenues will be raised from a new fee of $5 per night tax on hotel rooms in Georgia, an annual tag fee on alternative fueled vehicles (those that do not pay the “user fee” of a gas tax), and an impact fee on heavy commercial trucks.
The majority of the taxes and fees levied were designed to capture the impact of vehicles’ wear and tear on our roads, while the hotel tax was added to limit the increase in gas taxes to keep our taxes at or below our Neighbors in Florida and North Carolina. Neighboring states South Carolina and Tennessee that currently have gas taxes lower than Georgia are debating a similar measure to increase their state’s funding for roads as future funding from the Federal Highway Trust fund remains murky.
Other revenues that are being redirected to transportation funding include roughly $180 Million of gas sales taxes that had been previously diverted to the state’s general fund, an elimination of a $5,000 per car tax credit given to purchasers of electric vehicles, and an elimination of a tax exemption for sales of jet fuel to airlines.
According to the fiscal note prepared by the Governor’s Office of Planning and Budget, the measure is expected to increase revenue to GDOT by about $870 Million this year.
Some of those that voted against the measure have decided to rail against the measure as “$900 Million dollar tax increase” or even more misleading “The largest tax increase in Georgia history”. Neither of these statements hold up to scrutiny.
The actual increase in gas taxes – 6.7 cents per gallon – comes out to about $410 Million in increased revenue. The $5 per night hotel fee is estimated to raise about $158 Million – most of which will be paid for by non-Georgia residents. Add in about $3.5 Million from tag fees on electric cars and $5 Million for impact fees from truckers, and the new taxes in this bill amount to $576.5 Million dollars.
In 1988, Georgia added an extra percentage to the state sales tax, raising the rate from 3% to today’s 4%. Tax collections between 1988 and 1989 increased from $5 Billion to over $6.5 Billion, an over $1.5 Billion dollar increase of 18.13%.
In contrast, Georgia’s total net tax collections for the year ending June 30th were just a hare over $19 Billion. The portion of new taxes and fees levied in the transportation bill would represent a 3% increase.
Will these taxes continue to increase in the future? Yes, they are now indexed to account for increases in fuel efficiency in cars to preserve the ongoing buying power of this tax. Sales taxes by nature are also indexed as they increase as prices rise. Income taxes go up as wages rise. Thus, Georgia’s new gas tax structure will allow the Department of Transportation to plan on a consistent future revenue stream to allocate between maintaining our existing system while planning for growth.
The point here is simple. Those that are claiming this is the largest tax increase in Georgia history do not have history, facts, nor perspective on their side. And at least for now, they also do not have pump prices to bolster their case. Because of the declining price of oil, Georgia’s average gas prices have actually decreased by five cents per gallon since the new tax structure went into effect. Prices are down 88 cents per gallon from one year ago.
Georgia consumers are paying less, and will be getting more. It’s not a bad thing to have received a little luck from the world petroleum market at the same time leaders decided to demonstrate resolve to get Georgia out of our last place spot in infrastructure investment.
Charlie Harper is the Editor In Chief of PeachPundit.com, and the Executive Director of PolicyBEST, a public policy advocacy group focused on issues of Business & Economic Development, Education, Science & Medicine, and Transportation.