Gas consumption decreases, pulls down tax revenues

[Surlethe]

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INDIANAPOLIS (AP) — Soaring prices at the pump don’t necessarily mean big bucks for the state in taxes.
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The state’s gas excise tax, which is used for road construction and repair costs, is a fixed 18 cents on every gallon of gas. So even as prices rise, that tax remains the same.

But drivers are buying less gas this year to save money as prices approach $4 a gallon, and the state is seeing a decline in gas tax revenue.

Joyce Reese, for example, has started combining errands into one trip to save gas.
“I do everything on a schedule,” she said.

In the 2006 and 2007 fiscal years, the state collected about $570 million in gas excise taxes, said Chris Ruhl, state budget director.

So far this fiscal year, which runs from July 2007 through June 2008, gas consumption is down about 3 percent, meaning Hoosiers have bought 67 million fewer gallons.

That’s a $12 million hit on state road funding. The Indiana Department of Transportation has not been affected because its annual budget was based on a conservative estimate, Ruhl said.

Meanwhile, the state sales tax — 7 percent — does mean more money for the state since that revenue grows as prices increase.

The sales tax on gasoline goes into the state general fund, which is used to cover basic services like education, Medicaid and prisons.

During the first half of the 2008 fiscal year, sales tax collections at gas stations were up more than 30 percent, according to a report by the Indiana Department of Revenue. The report covered the period before the state increased the sales tax rate to 7 percent and before the recent extreme price hikes.

Although gas sales taxes are up, sales taxes in other industries are growing at a slower rate than during the same period the previous fiscal year. Several industries are seeing an overall reduction in sales tax revenue, including home improvement and furnishings stores and apparel shops.

Overall, the state is about $20 million under its forecast in sales tax collections for the fiscal year.

The sales tax on gasoline has been a hot button issue in Indiana for years.

Fuel wasn’t given an exemption in 1963 when lawmakers instituted the state’s first sales and retail use tax. Attempts to eliminate or reduce the tax can be difficult since doing so could cost the state hundreds of millions of dollars.

“It’s to the point that there are very difficult tradeoffs,” Ruhl said.

Former Gov. Frank O’Bannon suspended the sales tax on gasoline in 2000 on an emergency basis, which some called a political stunt. Gov. Mitch Daniels has declined to suspend the tax, citing an attorney general opinion that says he doesn’t have that authority.

Democratic gubernatorial nominee Jill Long Thompson wants to permanently cap the sales tax on gas at the $2.75 pump price.

Interesting; no time for any other comments.

[Zac Naloen]

I can see this happening in the UK soon.

It's costing some people close to £50 to fill up their tank (people with bigger tanks have to pay close to 100) and most have to fill once or twice a week if they are commuting far enough.

It now reached £1.13 per litre here at my nearest petrol station.

[His Divine Shadow]

Yeah it's 1.46-50 euros around here now. Not good, I drive up a tank a week on my commute.

[Broomstick]

Can I comment, being Hoosier?

This state's economy runs on two things: agriculture and heavy industry. VERY heavy industry, steel mills and chemical (including petroleum) refineries. Neither side is doing well - although demand for agricultural products is up due to both need for food and the biofuel thing the cost of producing agro-products is up due to fuel and fertilizer costs (water not such an issue - Indiana needs little or no artificial irrigation). The economy is in the toilet. Many people who worked outside those two major sectors, such as myself, have had our incomes plummet - I mean, I am no longer officially unemployed but I'm making 1/4 the income I was last year. So I'm "employed", whoopie, that doesn't make it OK.

Indiana's roads have never been known as fantastic. The interstates and the US routes have been kept up, but outside of that a lot of roads were and still are a layer of asphalt slapped on bare ground - no prepared roadbed/foundation. They deteriorate rapidly and need frequent patching. Municipalities usually managed to keep up with the patching, occassionally replacing roads but very slowly.

A few of the more affluent (and that is "affluent" only in a relative sense) communities are managing to resurface their main streets and patch others, but outside those areas I've seen "patches" that consist of gravel piled into a pothole rather than an actual repair of the road.

I've noticed a definite trend of more cars and fewer SUV's on the road. We always get motorcycles in the summertime, but the dealerships are doing a VERY brisk business in selling bikes. We're having a problem with people using under-powered scooters on roads, holding up traffic. More people are riding their bikes to work (another road hazard where there are no sidewalks and deficient shoulders). A lot of people just can't afford to buy gas, or a lot of other things. That will depress tax revenue that depends on sales. The grocery stores are staying afloat because people have to eat, but otherwise... retailers are hurting. The road repair funds are hurting. Times are hard and getting harder, even if my own personal situation is starting to improve.

O'Bannon's 2000 tax holiday "worked" because there was sufficient revenue from other sources to make up for it. This time, those other revenue sources are also not doing well. I'm not sure if it really provided a bump in the state economy or not, but it improved the mental outlook of state residents and in economics human emotion is a factor.

[Steel]

I dont see why this is a problem for the state at all. Less fuel used, so less tax collected for maintenance of roads etc. Less fuel used, so less wear on the roads as well.

[Xon]

I dont see why this is a problem for the state at all. Less fuel used, so less tax collected for maintenance of roads etc. Less fuel used, so less wear on the roads as well.

To abuse Morbo's saying "roads do not work that way!".

Economies of scale apply for road maintaince. So even those the it will lower the incidents that damage the road but it will not considerably lower the number of times it will require repairing those roads.

[Broomstick]

I dont see why this is a problem for the state at all. Less fuel used, so less tax collected for maintenance of roads etc. Less fuel used, so less wear on the roads as well.

We still have commercial trucks from panel vans to semi-trailers using those roads.

We have school and other buses using those roads

We still have (Og help us) "Michigan trains" using those roads - steel-hauling trucks that run between our mills and the auto industry plants elsewhere (particularly Michigan, hence the name). Let me illustrate how heavy/massive these things are - the last time there was a collision between one of these steel-hauling trucks and an actual train in our area the train lost. Destroyed the first two cars of the train and killed several people - they could drive the truck cab away, the driver was unhurt, and they were able to load the steel coil on another truck and haul it off for use.

What were you saying about less wear and tear on the roads...?

Cars and motorcycles don't eat the roads - large commercial vehicles do.

And, oh yes, there are our weather extremes - from -20 below zero to 100 above (in Celcius that's about -30 to around +37). There is usually not much in the road budget for salt so there's less damage from that than in Chicago but the thaw-freeze cycle plays merry hell with pavement. That happens regardless of traffic.

[Phantasee]

Alberta has similar issues with pavement. We have temperatures similar to yours, although you could shift it 5 degrees colder (in Celsius, of course). Lots and lots and lots of heavy commercial vehicles, thaw-freeze cycle, and we have salt and sand.

Of course, since asphalt is a byproduct of refining oil, we ended up with the most kilometres of paved road per person than any other jurisdiction in the world...

[Starglider]

Joyce Reese, for example, has started combining errands into one trip to save gas.
“I do everything on a schedule,” she said.

Oh noes! Ordinary Americans are being forced to employ basic common sense! What is the world coming to?

[Broomstick]

I dunno... check hell for snowballs

[Knife]

Joyce Reese, for example, has started combining errands into one trip to save gas.
“I do everything on a schedule,” she said.

Oh noes! Ordinary Americans are being forced to employ basic common sense! What is the world coming to?

You should be happy at the epiphany rather than poking fun. Isn't this a good thing?

[Sea Skimmer]

Oh noes! Ordinary Americans are being forced to employ basic common sense! What is the world coming to?

And the government is employing responsible fiscal planning too! Disturbing times we live in, I’m keeping my eye out for those Bladricks.

That’s a $12 million hit on state road funding. The Indiana Department of Transportation has not been affected because its annual budget was based on a conservative estimate, Ruhl said.

[Rightous Fist Of Heaven]

Luckily for me, two full tanks a month (thats about 120 L) is enough for both work and off-work driving. So even though gas is up to 1.5 € a liter around here, it's not killing my budget. Too bad there is absolutely no sensible bus connection to my workplace and its a bit too far to take the bicycle.

[CaptainChewbacca]

Thankfully, I only have to fill-up once every two weeks, so I'm only spending about $80 a month on gas.

[Surlethe]

And, oh yes, there are our weather extremes - from -20 below zero to 100 above (in Celcius that's about -30 to around +37). There is usually not much in the road budget for salt so there's less damage from that than in Chicago but the thaw-freeze cycle plays merry hell with pavement. That happens regardless of traffic.

At least in my part of the state, we don't have heavy traffic; the temperature dips above and below freezing pretty much daily for a month and a half in the spring and thaw, so our roads are shit. Add to that our ordinary economic woes, the loss of industry, etc., and we have practically no money to throw at making them better.

[Starglider]

Personally I've been spending a fair amount of time on coaches recently due to still not having found a replacement car I like. Yes I can work on my laptop, but it takes so long and it's so inconvenient and tiring that I still prefer driving. Despite the fuel price rises going Leeds <-> London by coach is still less than half the price of going by train, and I'm not paying another $50 (return) just for a marginal increase in legroom.