Nevadans constantly complain—and rightfully so—about the high price of gasoline in the Silver State. Although prices have declined in recent months, gas in Nevada costs significantly higher than in other states, including nearby California. Many critics, such as the editors of the Las Vegas Sun, allege the state is being "gouged by an industry that allows only token competition." Such claims remain to be proven, but one fact in the discussion regarding gas prices cannot be disputed: the majority of Nevada’s drivers pay a whopping 52.05 cents per gallon in federal, state, and county taxes. Herewith, an examination of Nevada’s gas tax structure.
The Federal Bite
The federal government’s gas tax is 18.3 cents per gallon. The most recent tax increase of 4.3 cents came in 1993, with the passage of President Clinton’s first budget. As the following chart indicates, the federal gas tax bite has risen precipitously in recent years:
The federal gas tax has risen faster than any "revenue enhancement" imposed on average Americans—450 percent in 18 years. The 4.3 cent increase is not earmarked for transportation, but rather deficit reduction. The federal transit fund (a dubious program at best, since public transportation in America is largely a failure) receives 2 cents. The remaining 12 cents is devoted to the federal highway trust fund.
Pork, Not Improvements
Critics of the federal government’s gas tax structure point out that the nation’s highways are hardly four and a half times better than they were before the gas tax explosion began. "After all," noted the Cato Institute’s Stephen Moore, "in the 1950s and 1960s we built the interstate highway system with a maximum federal gasoline tax of just 4 cents a gallon. Maintenance of those roads shouldn’t cost 18 cents a gallon." As Moore and others have documented, the federal highway fund is often looted by politicians for porkbarrel projects. For example, a $741,000 pub in San Francisco and a $30 million moving sidewalk located, not surprisingly, in House Transportation Committee Chairman Bud Shuster’s home district.
The State and County Bite
All Americans are forced to contribute to questionable uses of the federal highway fund, but the federal tax represents only one third of Nevadans’ gas tax obligation. The state of Nevada imposes the seventh-highest state gas tax in the nation, bested only by Connecticut, Rhode Island, Montana, Idaho, Nebraska, and West Virginia. Even more disturbing than the overall burden, the state gas tax’s growth has actually surpassed the rapid rise of the federal gas tax. In 1979, the state rate was raised from 4 to 4.5 cents. From then on the tax grew steadily: 10 cents in 1985; 12.65 cents in 1988; 15.75 cents in 1991; and finally 18.4 cents today. The bulk of that tax revenue is devoted to the state’s highway fund, but smaller portions fund the Department of Motor Vehicles, Department of Administration, Public Service Commission and collection costs incurred by the Department of Taxation.
However, the state gas tax is only part of the story. Unlike most states, Nevada mandates that its counties impose a tax of 6.35 cents per gallon. But state law also permits counties to tack on an additional tax of up to 9 cents. Six counties, including Clark and Washoe, impose the full tax, while Humboldt County is in the midst of phasing the tax in over a number of years. Thus, drivers in the most populous counties in the state pay a total tax burden of 52.05 cents. "Nevada’s [gas] tax structure is higher than almost any [other state’s]—the second highest in the nation after Hawaii," Nevada Gasoline Retailer’s Association President Steve Yarborough told the Reno Gazette-Journal in May of 1997.
Raising the Rates, Again
In November, Nevada Department of Transportation Director Tom Stephens suggested that counties which have not imposed the full 9-cent optional tax may have difficulty obtaining future funding from the state. At an interim legislative committee hearing, Stephens recounted NDOT numbers which suggest state road projects face a $2 billion shortfall. As a result, Stephens said rural counties should expect less money from the state, and raise more revenue within their borders. But Stephens is not alone—many Nevada government officials, and even business leaders, have called for the gas tax to be raised. At the same legislative hearing, Pamela Miller of the Associated General Contractors of Nevada voiced her approval of higher rates: "It’s time to consider either increasing the gas tax or indexing the gas tax." The desire to impose a heavier gas tax burden is shared by many county officials as well. On January 10, Washoe County Regional Transportation Commission members told a legislative committee of their desire to raise their county’s gas tax. The RTC’s Celia Kupersmith asked that legislators allow the county to index their optional gas tax rate to inflation.
But in one Nevada county, calls for raising the gas tax have fallen on deaf ears. The Elko County Commission, famous for its resistance to the dictates of the federal government, declined the state’s recommendation to raise its optional tax to 9 cents. In a November vote, county commissioners soundly defeated a proposal to impose the full tax. Dan Steninger of the Elko Daily Free Press noted the irony of state officials exerting pressure on commissioners to raise their counties’ gas tax: "It really is hard to believe that the very same state that continually whines about the mandates sent down from the federal lords can be so callous as to turn around and order its own subjects to ‘voluntarily’ raise their gas taxes." Steninger noted that similar to the federal highway fund, Nevada’s highway fund appropriates money for questionable projects, such as the relocation of historic Sherman Station from Jiggs to downtown Elko.
Cut Gas Taxes, Help the Poor
Government officials who call for additional gas tax increases seem oblivious to the impact such actions have on those with modest incomes. Moore summarized what should be obvious to lawmakers and bureaucrats alike: "Even most of America’s poor own a car and pay at the pump." Aside from Social Security and Medicare "contributions," gas taxes are perhaps the most regressive fees imposed on middle- and lower-class Americans. "Indeed," wrote the Heritage Foundation’s John Shanahan and Christine L. Olson, "1987 Bureau of Labor statistics data show that the poorest 20 percent of Americans devote 8.8 percent of their expenditures to gasoline and motor oil while the wealthiest 20 percent devote only 3.1 percent of their expenditures to gasoline and motor oil." The trucking industry reports that Clinton’s 4.3 cent tax alone adds $600 to the cost of operating one truck, which is passed on to consumers through higher prices.
Filling up at Nevada service stations is indeed expensive. But the role taxes play in the cost of gasoline is vital, and it should not be overlooked by members of the media, elected officials and bureaucrats. It is unfortunate that the discussion of gas taxes is usually a discussion of how much to raise, not lower rates. (At the federal level, it will be interesting to see if 1993’s gas tax hike—adopted to fight the federal deficit—is repealed once a balanced budget is finally reached.) While infrastructure needs within Nevada are indeed considerable, state and county officials should not blindly pass yet another hike in either state or county gas tax rates. Alternative revenue sources for road projects should be considered. Nevada’s drivers, burdened with the second-highest gas tax structure in the nation, already pay enough.
D. Dowd Muska, a non-smoker, is a contributing editor for Nevada Journal, the Nevada Policy Research Institute’s monthly magazine. He can be contacted at email@example.com.