On July 1, Georgia implemented a new flat-rate gas tax, increasing the excise tax by about 12 cents per gallon.
Georgia also removed the state’s 4 percent gas sales tax. The effective increase in gas taxes is prompting Georgia residents to cross state lines to buy gas in South Carolina.
Adding federal and state gas taxes, Georgians pay about 51 cents per gallon in excise taxes, and South Carolinians only pay about 35 cents per gallon in excise taxes.
Leaky Gas Tax
Scott Drenkard, director of state projects with the Tax Foundation, says Georgia’s leaking gas tax problem was predictable.
“In regard to cross-border shopping, we know that it happens,” Drenkard said. “Everybody shops competitively when they’re shopping for gas. It’s all about balance, and I think Georgia is trying to strike that. You have to pay for roads, but you can’t set the gas tax too high. … Otherwise, you get this gas tax leakage.”
Drenkard says shifting toward a strategy that creates more toll roads in the state and moves away from costly gas taxes would help solve Georgia’s lost transportation revenue problem.
“The revenue that [Georgia] gets from tolling only accounts for 1 percent of transportation,” Drenkard said. “Leaning on tolls would be good, because it would reduce the leakage issue. If you want to drive on the road, you have to pay the toll.”
Baruch Feigenbaum, a transportation policy analyst with the Reason Foundation, says Georgia’s gas tax change will affect consumer behavior in other unpredictable ways.
“I am sure some folks are crossing state lines, [but] I think this is a very small percentage, and it is not going to make economic sense for most of these folks to do so on a regular basis,” Feigenbaum said. “I am more concerned with the tax increase leading to more tax cheating, … folks arranging to buy gasoline without paying the tax or declaring a vehicle exempt due to being classified as a farm vehicle when it is not.”
Feigenbaum says advances in technology are making the gas tax unworkable.
“The problem with the gas tax is that it is slowly dying,” Feigenbaum said “The combination of more fuel-efficient vehicles and electric vehicles will require a change in funding methods. Georgia also included a fee for electric vehicles, and a special fee for trucks. Both special interest groups were underpaying for infrastructure, causing everyone else to have to pay more than their proportional share.”
Feigenbaum says a better long-term solution will need to be found, as gas taxes are only a temporary fix.
“Georgia’s solution stretches the gas tax as far as it can be stretched, providing a good short-term and medium-term solution, but not a long-term solution.”
Gabrielle Cintorino ([email protected]) writes from Nashville, Tennessee.
Yoshiaki Ohsawa, “Cross-Border Shopping and Commodity Tax Competition Among Governments,” Regional Science and Urban Economics: https://heartland.org/policy-documents/cross-border-shopping-and-commodity-tax-competition-among-governments/