Cheap gasoline is helping some states rake in more tax revenue

HOUSTON — As motorists consume more fuel in the face of cheap gasoline prices, they’re also pumping more money into state gasoline tax accounts, according to a new report from Moody’s Investors Service.

State and federal authorities both charge per-gallon fees that motorists pay in the course of fueling up at the pump. Generally, those taxes are a flat number and don’t fluctuate based on the cost of fuel.

In Texas, for example, motorists pay 20 cents per gallon of gasoline, on top of the 18.4 cent-per-gallon federal tax.

Americans drove 6 percent more vehicle-miles in January 2015 than they did the same period a year ago, according to the study.

“Lower prices at the pump have sparked an increase in fuel consumption and vehicle miles traveled, leading to higher gas tax collections, and we expect the trend to continue over the near-term,” Moody’s writes.

 

moody's gas tax miles driven

 

The report goes on to stay that the increased gas tax revenue will give states’ greater capacity to
issue debt for capital projects. That could help prompt a state infrastructure boom. The trend comes at a time when states’ have curbed transportation spending as fuel tax revenues has remained stagnant.

Since the trend is likely to be temporary, some states may hesitate to use the revenue as a means of issuing more debt. The report also noted that many states have opted to fund transportation projects as they go, rather than issue debt to pay for them.

Collective, states’ ability to issue debt tied to gas tax revenue has increased by 20.5 percent, to at least $56.2 billion of unused capacity in 2014, from $46.7 billion in 2011 according to Moody’s.

gas teaxes

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