Gas Tax Talk: Why Does My Fuel Cost So Much?

Date: August 13, 2018

Take a look at the hidden costs involved through one state's gas tax woes.

As families across the country pack up their cars for summer road trips, some wonder, how significant will the pain at the pump be?

Small businesses that depend on driving ask the same question all year long.

In May, CNBC reported that gasoline prices were expected to spike over the summer to a national average of $3 per gallon, a four-year high thanks to record demand, geopolitical events, and potential problems stemming from hurricane season or at domestic oil refineries and pipelines.

There’s another key factor contributing to the high prices paid at the pump: gas taxes. For example, in California, which has one of the highest gas taxes in the country, prices are nearing $4 per gallon. In 2017, California Gov. Jerry Brown signed Senate Bill 1 into law. The bill implemented a 12-cent gas tax increase on Nov. 1. The $52 billion hike, spread over 10 years or $5.2 billion annually, is supposed to go toward investing in the state’s roads and infrastructure, and while NFIB agrees that this is important, 90 percent of members opposed raising new taxes to do it. Now, NFIB is involved in Prop 6, the ballot initiative effort to repeal the gas tax.

“My same-day delivery business is directly impacted by the devastating gas tax increase in Senate Bill 1,” NFIB member Donna Springer, owner of Go-Getters Delivery in West Sacramento, said in a statement before the bill was passed. “The fact that these taxes and new annual ‘transportation improvement fees’ automatically increase every year with no expiration makes it hard to imagine my business surviving even a few years from now. SB 1 will cost my small business thousands of dollars per year, which will force me to choose between raising prices on my customers or reducing hours for my hardworking employees.”

RELATED: NFIB’s positions on climate and energy policies

Therein lies the chief problem with ever-escalating gas taxes: the hidden costs involved. Consumers won’t simply pay a little more at the gas pump and then move on. Rather, as gas taxes drive up the cost of fuel, everything else—such as groceries, clothes, consumer goods, and anything else transported and delivered by truck or other transport methods—becomes more expensive as well.

In turn, business owners such as Springer are forced to decide whether they pass these cost increases on to consumers or cut hours or staff to make up the difference. For example, The Wall Street Journal reported U.S. airlines have increased ticket prices and 3M and Whirlpool have pointed to higher material costs as challenges.

The end result? Dampened economic growth, both at the state and federal level.

RELATED: Tips to Save on Your Small Business Summer Energy Bills

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