On July 14th, the IRS held a public hearing for the debt-equity rule (section 385 of the IRS code) that the Treasury Department proposed last April. The hearing, which had as many as 16 speakers from various industries,...
- The Tax Policy Blog
- Massachusetts Ballot Referendum Challenges Gas Tax Indexi...
Massachusetts Ballot Referendum Challenges Gas Tax Indexing
This November Massachusetts will vote to repeal House Bill 3847. The law, signed in 2013, raised the state’s gas tax from 21 to 24 cents per gallon and automatically tied the tax rate to inflation for future years. Despite opposition by the group Tank the Gas Tax, which successfully gathered enough signatures to trigger a referendum to repeal the tax increase, the 2013 measure is a sensible solution that stabilizes state gas tax revenues for future years.
Since 1991, the last time Massachusetts passed a gas tax increase, Massachusetts gas tax revenues have fallen 18 percent after inflation adjustment while the total level of state and local gas tax collections across the nation have Increased by 15 percent. Over this same period, Massachusetts gas tax revenues have fallen from 0.5 percent of the state’s GDP to only 0.15 percent, showing that gas-tax revenues have diminished even as the rest of Massachusetts’ economy has grown.
Yes, consumers may be driving less and cars have become more fuel efficient, but the gas tax’s declining share of revenue and GSP from 1991 to 2013 show that this is not the entire story. The gas tax prior to the 2013 changes failed to generate revenue at a rate to match the growth of the rest of the economy. As the Consumer Price Index increased by 71 percent from 1991 to 2013, the value of a 21 cent tax on gasoline diminished. Essentially, Massachusetts has been experiencing a de facto tax cut for that last 20 years.
Raising the rate from 21 to 24 cents and indexing the tax for inflation fixes this issue. Contrary to what groups like Tank the Gas Tax claim, tying the gas tax to the rate of inflation is not an arbitrary tax hike but a way to stabilize gas tax revenues.
Get Email Updates from the Tax Foundation
Join the Tax Foundation's fight for sound tax policy Go
About the Tax Policy Blog
The Tax Policy Blog is the official blog of the Tax Foundation, a non-partisan, non-profit research organization that has monitored tax policy at the federal, state and local levels since 1937. Our economists welcome your feedback. If you would like to send an e-mail to the author of a blog post, please click on that person's name to locate his or her e-mail address or visit our staff page here.
Recent Blog Posts
Related State Articles
- Lunch Links: Clinton on Taxes in Acceptance Speech; Vancouver Tax on Foreign Buyers; Louisiana Runs Out of Film Credit Money
- Lunch Links: South Dakota Internet Tax Court Filings; Time for Nebraska Tax Reform; Sales Tax Holidays Coming Up
- Lunch Links: Massachusetts Marijuana Initiative Gets Clarification; Alabama Starts Tax Amnesty; Why Arizona Sales Tax is High
- 1 of 32
- next ›