Taxing Gas

The NY Times article, In New York, Debating a Flat Tax on Gasoline was a bit of an eye opener. Gas in the city is always crazy expensive, and now I know why- there are eight taxes per gallon. The biggest shocker is the 75 cents (!!) per gallon that goes to the Metropolitan Transit Authority (MTA).

Each gallon of gas sold in New York actually includes eight different taxes. In addition to the city’s 4 percent sales tax, and the transportation authority surcharge, there is a federal excise tax of 18.4 cents. The state also collects an 8-cent excise tax, an 8-cent sales tax and a petroleum business tax of 16.4 cents a gallon.

In addition, drivers pay a “spill tax” of 0.3 cents a gallon for environmental preservation and a petroleum testing fee of 0.05 cents.

Higher gas tax in a city with spider web like public transportation definitely has drivers drive less. For example, the 8.6 percent one year increase in city tax receipts this past winter pale in comparison to the actual 31 percent increase in gas prices over the same period.

At the center of the debate is a flat tax versus the current rate of percentage. While drivers may welcome a flat tax, there is no reason why a city that is the single largest polluter on the Eastern Seaboard should encourage policy that encourages more driving. And this is coming from a car owner (granted, whose car now remains parked forever). Also, the flat tax makes little economic sense.

“You’re kidding yourself if you think that an industry that makes as much as it can will pass along the savings to the public,” Michael F. Conners II, the comptroller in Albany County, which abandoned its flat-fee tax after six months. “The oil companies say they would never take this tax away, but it’s absorbed into the price.”

Mr. Conners said that his county would have lost $4.6 million in taxes had it kept its cap in place for a full year. That would have amounted to 3.4 percent of the county’s total receipts from all sales, property and other taxes. “This was not help for the driving public,” he added, “but a transfer gift to the oil industry.”