ALEC Urges Temporary Repeal of State Gas Taxes

Published July 1, 2004

The nation’s largest bipartisan, individual membership organization for state legislators is urging policymakers to give drivers relief at the pumps this summer by temporarily repealing state gas taxes.

“The states must take all appropriate actions to lower fuel costs,” wrote Duane Parde, executive director of the Washington, DC-based American Legislative Exchange Council (ALEC), in a May 20 news release. “The average state levies a 24.3 cent tax on each gallon of gasoline. Temporarily repealing these taxes would be good for the bottom line of the family budget.

“The average price of a gallon of gasoline has skyrocketed … While much blame is placed on the oil and gasoline companies, government also contributes to the high cost of fuel through taxes and regulation,” noted Parde.

Oil Futures Soar
Prices of oil and gasoline in the futures market hit record highs on May 24, despite Saudi Arabia’s pledge to increase production in June or July. The futures price of light crude oil for July delivery rose to $41.72 a barrel on the New York Mercantile Exchange, exceeding the previous record, $41.55, set just a week earlier.

Prices for wholesale gasoline for June delivery rose 4.1 cents to a record high $1.46, excluding state and federal gasoline taxes. That marked the highest wholesale price for gasoline since the contract began trading in 1984, 20 years ago.

U.S. gasoline supplies were reported at 203.7 million barrels on May 14, about 4 percent under the five-year average for the season. At the same time, demand for gasoline has increased 3 percent since the same period in 2003.

According to the Energy Information Administration, the average U.S. retail price for a gallon of unleaded gasoline was $1.94 on June 21. In California, the average price was $2.26, highest in the nation.

“Until the fundamentals change, there’s going to be upside pressure on prices,” said Mike Harvey, an oil and gasoline analyst for ABN Amro Inc., based in New York.

“People aren’t going to stop driving because prices are high,” Harvey told the Chicago Tribune News Service on May 25. “People are going to drive. They’ve got to drive their kids to school or take their vacations.”

Pennsylvania Responds
Pennsylvania lawmakers already have proposed measures to temporarily roll-back the state tax on gasoline by 12 cents a gallon.

Reported Channel 6 news in Philadelphia, “State Senator Allyson Schwartz of Philadelphia and Representative Peter Daley of Washington County, both Democrats, say the current record-high price of gasoline not only forces Pennsylvanians to pay more to operate vehicles, but also inflates the cost of most consumer goods.” In May, the two introduced similar gas tax reduction bills in the Senate and House.

Governor Ed Rendell (D) is lukewarm on the proposals. While Channel 6 reported on May 26 Rendell understands people are “frustrated over soaring fuel prices,” the governor believes a tax rollback will have “little effect on prices at the pump.” He also warned a gas tax break would “cut into revenues needed to maintain state highways and bridges.”

The Schwartz and Daley proposals would cut the state tax on gasoline from 26 cents a gallon to 14 cents for as long as six months. The tax reduction would be suspended after three months if the average price of a gallon had fallen to less than $1.80.

“High gas prices create a massive drag on our economy, slowing the recovery and stifling job creation,” said Schwartz.

John Skorburg is managing editor of Budget & Tax News. His email address is [email protected].