Ohio Gas Tax Proposal

Ohio Governor Mike DeWine has proposed an $0.18 per gallon increase in the state gas tax, taking the tax from $0.281 to $0.46 per gallon.  The tax is proposed to fund state transportation infrastructure improvements.  As you decide you opinion on the tax, a couple of things to consider:

  1. According to data from the Tax Foundation, Ohio currently ranks #29 in state gas tax rankings.  The $0.18 increase will take Ohio into the top 10 in state gas taxes–if no other states change their taxes. The exact ranking is difficult to figure out because some states add a state sales tax to their gas tax, while others don’t.
  2. Much, but not all, of the gas tax will be paid by gas consumers. While the tax is actually paid by the seller (the seller writes the check to the state), the amount of the tax passed on to consumers depends how sensitive consumers are to changes in the gas prices.  The less sensitive consumers are to changes to gas prices, the more of the tax they are willing to pay.  Most evidence shows that total gas consumption is fairly insensitive to changes in the price at least over a short period of time (how much can you change your gas consumption by the summer?).  Over longer periods we would expect to see adjustments to the higher prices, like purchases of more fuel efficient cars, more use of mass transportation, and less likely, but possibly changes development and home-buying behavior to reduce the need for driving.
  3. As the debate goes on we might expect to see gas prices tick up soon in anticipation of the future price increase (proposed for July 1).
  4. The Ohio Department of Transportation estimates a need for over $1 Billion per year to make necessary infrastructure improvements.  Preliminary estimates from the Governor show that the new tax will raise the required revenue.  This hasn’t been verified independently yet (as far as I know).

Anyway, it will be an interesting discussion.