Gasoline Taxes Rising

NEW YORK -- The threat of war in Iraq, civil unrest in Venezuela, tight inventory controls by oil companies, alleged price gouging by oil companies. It's a perfect storm at the pump, and another wave may be forming.

Retail gas prices are up to a national average of $1.66 a gallon, according to the Department of Energy. Now, politicians across the nation are trying to raise fuel taxes. In Washington, D.C., as well as in more than half the state capitals, there are proposals to increase the levies governments charge on gasoline, diesel, and other automotive fuels. If the plans become law, they could add more than 25 cents a gallon in state and federal taxes, on top of the 40-to-50 cents a gallon consumers already pay, CNN reports.

At the federal level, Rep. Don Young (R-Alaska), chairman of the House Transportation and Infrastructure Committee, is spearheading a drive to nearly double the federal gas tax. He wants to phase in a series of annual increases that would raise the feds' take from the current 18.4 cents per gallon to more than 33 cents by 2009.

In state houses, a combination of increased state spending and recession-ravaged tax bases has legislators in both parties scrambling for new sources of income. For many, the small, yet pervasive gas tax is a tempting target, because it seems painless relative to more visible items like state taxes on income or property. Here is some recent activity:

* In Ohio, Republican governor Bob Taft -- who during his re-election campaign mocked his opponent as "Taxin' Tim" Hagen -- has proposed a 6-cent increase.
* In Indiana, where a 3-cent increase went into effect on Jan. 1, legislators are already talking about another hike.
* In California, gasoline taxes are on the agenda in Sacramento, as well as within regional authorities in northern and southern parts of the state.
* Washington state voters last year rejected a referendum that would have increased gas taxes by 9 cents a gallon. Now, Republican legislators and Democratic governor Gary Locke are trying to push through a 5-cent increase.
* In Maryland, newly elected Republican governor Robert Ehrlich -- who ran on a pledge to oppose any broadening of the state sales tax -- began publicly considering a gasoline tax increase even before his inauguration.

In all, at least 26 states are pondering increasing fuel taxes, according to the American Automobile Association (AAA). That is in addition to the five states where hikes passed in 2002. To be sure, most of the proposals are in the planning stages, the report said. An actual bill has passed only in Wyoming, and one has been explicitly voted down only in Virginia. Still, expect more attention to be paid to the issue in coming months.

The biggest worry, however, is not in any individual hike, but in the chance that state taxes will climb steadily and federal gas taxes rise in tandem. Connecticut, for example, already has one of the nation's highest state taxes on gasoline, at 25 cents per gallon. Legislators there have publicly discussed raising that to 40 cents per gallon by 2007. If the federal effort were also successful, drivers there could be paying as much as 73 cents a gallon in taxes by the end of the decade.

Moreover, an increasing number of legislatures are exploring ways to automate the process of increasing gas taxes in the future. Seven states already employ mechanisms that tie the level of gas taxes to some variable -- from the Consumer Price Index to the amount of money in state budget coffers -- which triggers an increase without any new vote in the legislature.