A reality based independent journal of observation & analysis, serving the Flathead Valley & Montana since 2006. © James Conner.

13 February 2017

Garner’s 8-cent gas tax increase is only half of inflation loss

garner_frank_left_150

Updated 15 February 2017. Rep. Frank Garner (R-Kalispell) announced Friday that he will introduce legislation to increase Montana’s fuel tax by eight cents a gallon for gasoline, and 7.25 cents per gallon for diesel, bringing the tax for both fuels (diesel is called “special fuel” in the MCA) to 35 cents per gallon. Garner’s draft bill now is online for review.

Gasoline’s energy content is 120,400 Btus/gallon, diesel’s 137,400 Btus/gallon; therefore, diesel, the more polluting fuel, is doubly favored by Garner’s bill.

The federal excise tax on gasoline is 18.4 cents per gallon; on diesel, 24.4 cents per gallon.

The current 27 cents per gallon gas tax took effect in 1994. Using a standard price deflator, I prepared the following graph that displays how much the fuel tax would be had it been adjusted for inflation. Garner’s increase recovers approximately half of the tax’s purchasing power that was lost to inflation since 1994.

I take no position on whether Garner’s proposed tax increase should be adopted (at The Western Word, J.M. Brown does). But I do take note that although going a quarter-century without adjusting a fuel tax rate may be popular politically, it generally is not wise governance. There’s a good case for automatically adjusting the tax rate for inflation, but Garner’s bill does not include an indexing mechanism.