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Folks, this along with the tax hikes in Virginia are being held up as the model for the next federal highway bill. Con. Bill Shuster from Pennsylvania is a BIG reason this series of tax hikes passed a Republican legislature. Now the special interests are hungry for more at the federal level, using PA as a test case. It’s time to DUMP Shuster, who has drawn an opponent in his primary race.
Pumping out the Pennsylvania gas tax facts
By Liam Migdail-Smith
Reading Eagle
January 21, 2014
There's been a lot of debate over the $2.3 billion boost to transportation funding Gov. Tom Corbett and the Legislature approved in November.
On one hand, it will help Berks County and the rest of the state pay for road and bridge projects, such as widening Route 222 between Reading and Allentown.
On the other hand, drivers will have to pay more.
There's been a lot said about changes related to the gas tax that took effect Wednesday. Some of it's true. Some of it's not. Some of it straddles a gray area.
Here are the facts behind the rumors:
Statement: The transportation package "fully eliminates gas tax on motorists" and "shifts the gas tax burden to oil companies."
Determination: Mostly false.
The facts: The plan gets rid of the 12-cents-per-gallon flat tax, which drivers pay at the pump, and replaces it with a rate hike in the oil company franchise tax, which gas stations pay at the wholesale level.
For the state, it's a wash (although there are other changes to the franchise tax that will generate more money). The difference is that all taxes will be paid at the wholesale level, instead of at the pump.
But don't be fooled into thinking drivers are off the hook for the bill. Gasoline companies tell The Associated Press they have no intention of eating the cost and plan to pass along all increases to customers through higher prices.
Statement: The transportation plan will result in a 28-cent-a-gallon increase in gas prices.
Determination: Too early to tell.
The facts: Critics referenced a 28-cent price increase as a reason to oppose the transportation funding package. There could be a 28-cent increase but it's not a definite and it's not going to happen all at once.
A cap on the franchise tax is being lifted gradually over five years. This year, the tax will rise 21 cents a gallon to 40 cents, a net increase of 9 cents a gallon when combined with the elimination of the flat tax.
In 2017, the cap will be gone and the tax will be calculated based on the average wholesale price of gas. If that price stays the same as it is today, it's calculated that drivers would pay about 28 cents more per gallon than they do now. But it's tough to predict what prices will be in 2017.
Statement: Uncapping wholesale gas tax is not the same as an increase.
Determination: Mostly false.
The facts: The tax, paid per gallon, is calculated based on the average wholesale price of gas, which the state revenue department sets annually based on the market.
When the tax was created, it was capped so it couldn't be assessed on a price higher than $1.25 per gallon. The price is now more than $3 per gallon but the tax is still being paid on $1.25 because of the cap.
Starting this year, the cap will be gradually lifted and then removed so the tax catches up with inflation. But the tax rate itself won't go up, except to help offset eliminating the 12-cent flat-rate tax.
Think of it as your property value increasing after a reassessment. Even if the tax rate stays the same, your bill goes up because it's being assessed on a higher value.
So is uncapping the franchise tax an increase? Technically, no. Does it mean a higher tax bill? Absolutely.
Statement: The gas tax will decrease if prices decrease.
Determination: Mostly true.
The facts: With the franchise tax cap gone, the tax will change each year based on the wholesale price of gas. If the price of gas goes up, the tax goes up. If the price goes down, so does the tax.
The reason this is mostly true is that there's a limit on how low the tax can drop. The law places a floor of $2.99 on the per-gallon price the tax can be assessed at. If the price drops below $2.99 per gallon, the tax will still be assessed at that floor price.
Statement: The state will use gas tax revenues for non-transportation expenses.
Determination: False.
The facts: The fear whenever state government is raising more revenue is that the money won't go where it's supposed to. And it's not an unreasonable one.
But the gas tax money is legally blocked from going anywhere except two funds: the Treasury's liquid fuels fund, which distributes road money to local and county governments; and the motor license fund, which funds PennDOT projects.
There are some expenses other than roadwork that are paid with the motor license fund, funding highway patrols by state police. But they're transportation-related. That's why the gas tax is called a "user fee." Those who use roads and bridges pay to build, fix and maintain them.
Statement: Gas tax money will help pay for public transportation, airports, rail projects, bicycle and walking trails and other non-road and bridge projects.
Determination: Gray area.
The facts: Gas tax money is required by law to be used for roads and bridges. But projects dealing with other modes will also get funding under the new transportation bill.
The increased public transportation funding will come from dedicating the entire $450 million payment the Pennsylvania Turnpike makes to the state each year to the mass transit fund. Those payments will end after eight years and then vehicle sales taxes will foot the bill.
At present, $200 million of that turnpike payment is used for roads and bridges. But under the new bill, that $200 million will be part of the $450 million diverted to the transit fund. Extra gas tax money will plug that gap in road and bridge funding.
There is also a new $144 million fund to award grants for aviation, railroad, bicycle and pedestrian projects. There is $35 million from the gas tax being added to that fund but PennDOT says it can only be used for projects that also affect a road or bridge, such as fixing a highway exit to improve access to an airport.
Sources: PennDOT, Pennsylvania Highway Information Association, Associated Press
How it works
Most of the $2.3 billion in new transportation funds the state government recently approved comes from changes to Pennsylvania's gas taxes. Here's how they're changing: How it worked Pennsylvania had two gas taxes that were calculated differently. Flat tax:
• Paid by drivers at the pump.
• Assessed on each gallon of gas sold.
• Stayed at 12 cents.
Oil company franchise tax:
• Paid by gasoline companies at the wholesale level but reflected in retail prices.
• Also assessed per gallon of gas sold.
• Varied each year based on the average wholesale price of gas, which the state revenue department set annually.
• Calculated by multiplying a tax rate (153.5 mills for regular, 208.5 mills for diesel) by price.
• The price the tax was based on was capped at $1.25 per gallon. The price is now more than $3 per gallon but tax was still paid at the $1.25 cap last year.
• Tax at end of 2013 was 19.2 cents for regular and 26.1 cents for diesel. Here's the math for regular: 0.1535 (rate as decimal) x $1.25 (capped price) = $0.192.
How it changes
The transportation funding bill brings two major changes to how state gas taxes are figured.
Cap lifted:
• The franchise tax price cap is lifted gradually over five years.
• The cap increases to $1.87 in 2014, $2.49 in 2015 and is eliminated by 2017.
• When the cap is eliminated, a floor price is set at $2.99 to stop a major price drop from disrupting transportation funds.
Move to one tax:
• The flat tax was eliminated at start of 2014.
• The franchise tax rate is increased to make up difference (217.5 mills for regular, 272.5 mills for diesel).
• As the cap is gradually lifted, the tax rate decreases gradually. In 2018, it will be 192.5 mills for regular and 247.5 mills for diesel.
Sources: PennDOT, Pennsylvania Highway Information Association