Staff Report
Published Dec. 15, 2011

An analysis shows South Carolina is losing out on more than $400 million a year in transportation revenue because state lawmakers have not increased the gas tax.

Lawmakers reluctant to increase gas taxes have cost their states more than $10 billion annually, according to a 50-state analysis by the Institute on Taxation and Economic Policy.

The losses are heightened by the declining federal gas tax, which also supports state transportation projects and has lost 41% of its value since it was last raised in 1993, the institute said.

"Unfortunately, many politicians won't consider touching the gas tax," said Carl Davis, senior analyst at the non-partisan organization based in Washington, D.C. "They are raising sales taxes, fees on vehicles, tolls on roads, even looting education funds, all to make up for the stagnant gas tax. But they can't bring themselves to modernize the biggest source of transportation revenue that's actually under their control. It makes no sense."

South Carolina motorists pay 35.2 cents in federal, state and local taxes on a gallon of gasoline, according to the American Petroleum Institute. The amount includes the state gas tax of 16.8 cents per gallon, which was last raised 22 years ago.

The total tax on gas in South Carolina is the fourth-lowest in the United States, according to the petroleum institute. Alaska has the lowest rate at 26.4 cents per gallon; and New York has the highest at 69.1 cents. The U.S. average is 49.5 cents per gallon.

The study pegged South Carolina’s annual loss in federal highway revenue at $407 million.

The study shows that while state gas taxes remain flat, the cost of paving roads and building bridges has increased.

"It's basic math," Davis said. "The road repairs you could buy in 1990 with 20 cents, for example, are going to cost 34 cents today. But we still see some states collecting the same flat 20-cent tax that they did back in 1990. That's the definition of unsustainable."

After adjusting for construction cost growth, the average state's gasoline tax rate has effectively fallen by 20%, or 6.8 cents per gallon, the study said.

The institute recommended the following changes to South Carolina and other states that have fallen behind in raising their gas tax:

· Increase rates to reverse their long term declines.

· Set the gas tax to grow alongside the cost of transportation construction projects.

· Create or enhance targeted tax credits for low-income families to offset the impact of gas tax reform.

Founded in 1980, the Institute on Taxation and Economic Policy is a nonprofit, non-partisan research organization, based in Washington, D.C. that studies federal and state tax policy.

The report, called "Building a Better Gas Tax: How to Fix One of State Government's Least Sustainable Revenue Sources," is available at the institute’s website.