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It makes far more sense to eliminate the state gas tax and increase the general sales tax by 1 cent, than it does to increase the state gas tax by 15 cents, says ND Watchdog Network.

No, It’s Not Time To Increase The Gas Tax

Earlier this week, a shocking headline was posted by an unlikely source.

Rob Port of the SayAnythingBlog posted an article announcing his support of an increase in the gas tax.

Port says:

You may be wondering why a conservative with a preference for limited government is in favor of a tax hike. It’s an easy case to make… The best way to raise that money is through the tax on gasoline. The problem is that the tax on gasoline is a political hot potato. The price of gas is extremely visible to consumers, and when it goes up they get angry. All the more so when the price hikes are the result of public policy as opposed to the vagaries of the marketplace. So the gas tax must go up. Definitely at the federal level, where it hasn’t been raised since the early 1990’s, and perhaps at the state level too.

While it may be the better approach at the federal level, it is not a good option at the state level from a mathematical or economic standpoint.

Because of the current economic slowdown, for the purposes of this analysis, I will be using 2011 as a baseline year.

According to the 2011 Financial Facts published by the Legislative Council:

Page 34 quote: “Both gasoline and special fuels (diesel) are taxed in North Dakota at a rate of 23 cents per gallon. A one-cent increase in the gas tax is estimated to generate an additional $3.6 million per year or $7.2 million for a biennium. A one-cent increase in the special fuels tax is estimated to generate an additional $2.0 million per year or $4.0 million per biennium.”

Thus, the 23 cent fuel tax generates $165 million per biennium, based on a 2011 baseline (“pre-boom peak”).

Page 8 shows us how that compares to the general state sales tax: The 5 cent state sales tax generated $1.385 billion – or $277 million per cent.

So, hypothetically, if the state fuel tax were to be eliminated, and the sales tax increased by 1 cent to 6 cents – it would result in a 67% increase in revenue from $165 million to $277 million. The general sales tax would e 1% higher, but the price of gas would no longer be inflated by the state’s 23 cent per gallon gas tax.

Obviously, it makes more mathematical sense to rely on sales tax than gas tax at the state level.

Furthermore, this approach economically would allow for border cities to attract cross-border cheap gas seekers. If gas prices were an extra 23 cents per gallon lower in Fargo, that would draw a lot of drivers from Moorhead to fill up – which would also increase taxable sales in C-stores and other stores – resulting in an even higher level of sales tax revenue.

It would take a 15 cent increase of the current gas tax to create the same revenue; which would shift the border crossing activity the other way!

It makes far more sense to eliminate the state gas tax and increase the general sales tax by 1 cent, than it does to increase the state gas tax by 15 cents.

We are not advocating this position, just pointing out the facts.

Related: Commission On Initiated Measures Is Unconstitutional

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