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States Proposing Gas-Tax Hikes Are Ignoring Low-Income Drivers

02/10/2015 05:31 pm ET | Updated Apr 12, 2015

Politicians across the country want to fix the roads.

And they want to do it at the expense of lower-income drivers.

Michigan Gov. Rick Snyder approved a ballot question that will ask voters in May if they want to increase the state gas tax to 7 percent from 6 percent per gallon. He's tied this vote to a proposed $1.3 billion in spending on infrastructure. New Jersey politicians are floating the idea of hiking the state gas tax to salvage the near-bankrupt trust used to pay for the state's roadways. Georgia is eyeing an increase on its 4 percent sales tax on gas.

A reasonable, fixed-rate gas tax makes sense as a way to pay for infrastructure needs. But the increases that lawmakers are proposing would hurt low- and middle-income families the most. According to the Brookings Institution, low-to-moderate-income households that own cars drove about 10,000 miles and spent about $1,500 on motor fuel during 2010, when the average price of gasoline was about $2.80. The group concluded that "every dollar increase [in the price of gas], holding the number of miles driven constant, would cost these moderate- and lower-income households an extra $530 per year."

Conversely, former Deputy Treasury Secretary Roger Altman told CNBC that falling oil prices have created a "$200 billion stimulus package" for Americans. That means more money in the family budget, which families with less disposable income desperately need.

Some Illinois politicians have jumped aboard the gas-tax hike bandwagon. But in Illinois, the state sales tax on gasoline isn't tied to roads. Instead, much of what drivers pay is dumped into the state's General Fund and used for everything from pensions to human services.

That's just one problem.

Another problem is that gas prices in Illinois' largest city are among the highest in the country.

The average price for a gallon of gas in Chicago as of Feb. 9 was $2.57 (nearly $0.40 higher than the national average), according to AAA.

The raw price per gallon is just $1.87. The rest comes from 10 tax sources, totaling $0.70.

Now, Illinois politicians want to raise the $0.19 state excise tax by $0.04 to pay for a five-year road plan, according to the Associated Press.

But making it more expensive for people to get to work won't help anyone, especially given Illinois' bad habit of levying tax hikes in the name of one cause and spending the revenues for another. (See: The 2011 income-tax hike enacted in the name of paying down unpaid bills and stabilizing the state's economy. Today, the state still has $5.9 billion in unpaid bills and the worst pension crisis in the country.)

Politicians who are worried about a drop in gas-tax revenue (that comes just as consumers are celebrating lower gas prices that keep more money in their personal budgets) should take a hard look at spending before considering raising taxes on a product that is already taxed on multiple levels. They should eliminate percent-based taxation and replace it with fixed amounts, which would stop revenue fluctuation and provide predictability and transparency for drivers.

Illinois and the eight other states with an additional percentage-based state sales tax on gas should eliminate double taxation. And before politicians ask for more money they should come up with a concrete plan - it's one thing to say you need money for roads; it's another thing entirely to present a rational need and a reasonable, detailed approach.

People with enough money won't have to think twice about paying more at the pump. But for low-income drivers trying to get to work and raise their families, a tax increase on gas would do a lot of damage.