Below is the current allocation of motor fuel taxes based on the four-year average price of motor fuel where the consumer pays 29.2 cents per gallon.
| Cents Per Gallon | Revenue (in Millions) |
|
| State Excise Tax | 7.5 | $450 |
| State Sales Tax | 10.2 | $610 |
| State Sales Tax (“4th Penny”) | 3.4 | $203 |
| Local Sales Tax (based on $3.39 average retail price) | 8.1 | $488 |
| 29.2 | $1,752 |
Below would be the allocation of motor fuel taxes based on the current version of the Transportation Funding Act (as of March 4) with the proposed amendment to reduce the state excise tax. This would convert most sales taxes on motor fuel to a state excise tax of 24 cents per gallon. Only SPLOST and ESPLOST sales taxes would continue to be applied to motor fuel. Based on fuel prices as of January 2015[1], the average local sales tax would equal 4.2 cents per gallon. The total is 28.2 cents per gallon, one cent per gallon lower than the four-year average. (The 4.2 cents per gallon could increase or decrease based on future changes in the price of motor fuel. If the price of gasoline returned to the four-year average of $3.39, the local tax would be equal to 5.5 cents per gallon and the total motor fuel tax on gasoline would rise to 29.5 cents per gallon.)
| Cents Per Gallon | Revenue (In Millions) |
|
| State Excise Tax | 24.0 | $1,440 |
| State Sales Tax | 0.0 | $0 |
| State Sales Tax (“4th Penny”) | 0.0 | $0 |
| Local Sales Tax (based on $2.59 retail price) | 4.2 | $254 |
| 28.2 | $1,694 |
For the average consumer, the only other tax change would be the increase in the local sales tax rate for LOST/HOST/MOST and ELOST taxes. These rates would increase from 1 percent to 1.25 percent. A family with an average income in Georgia spends about $16,400 a year that is subject to local sales tax (groceries are included because they are not exempt for local sales taxes)[2]. A 0.25 percent increase in the rate would increase the average family’s taxes by $41 per year. (This increase in the rate would be automatic, but local governments could hold a referendum to reduce the rate back to 1 percent.)
From a transportation perspective, the shift in the excise tax would increase dedicated state and local transportation funds by approximately $700 million. Eliminating exemptions for aviation fuel, eliminating tax credits for alternative fuel vehicles as well as charging these vehicles an annual fee will add $91 million a year initially. This amounts to an increase of nearly $800 million a year in dedicated funding. (Although proceeds from the ESPLOST tax on motor fuel — approximately $141 million — is included in this total, these funds would do very little to improve the transportation infrastructure of the state.)
The state needs to identify a minimum of $1 billion of dedicated funding. The calculations above do not count additional bond funds ($100 million per year has been proposed) or additional revenue based on the indexing of the state excise tax for inflation and fuel efficiency. Finally, this does not count any proceeds from TSPLOST, which could become more politically likely if proposals are successful to allow for smaller regions and rates of less than 1 percent.
Caveat: As soon as this is posted, the bill is likely to have changed.
UPDATE: The amendment reducing the state excise tax was withdrawn, which brings the total tax on motor fuel to 33.4 and adds $312 million a year in revenue to the above calculations. The bill was approved and now goes to the Senate.
Footnotes:
[1] https://dor.georgia.gov/sites/dor.georgia.gov/files/related_files/document/Prepaid%20Local%20Tax%20on%20Motor%20Fuel%20Sales%20Effective%20January%201,%202015.pdf
[2] http://cslf.gsu.edu/files/2014/06/inquiry_from_chairman_hill_senate_fair_tax_study_committee_regarding_taxable_consumption_of_households_at_different_income_levels_and_other_matters.pdf, See chart on page 2.