Higher Oil Prices Mean Higher Taxes
Not so long ago, we examined the taxes included in the cost of gasoline and used California as an example.
With the rapidly rising cost of oil, it reminded me that this has resulted in even higher taxes! There are federal excise and other such taxes that are based on a gallon of gas… so they have remained constant. State and local sales taxes, however, are PERCENTAGES… so, as prices have gone up, taxes have ALSO risen.
This means that, not only are we paying more for each gallon of gas because of the increase in world oil prices… but the increase is compounded by applying an additional 8% or 10% (or whatever the combined state and local tax rate is). Talk about adding insult to injury!
Interestingly, I haven’t heard anyone talk about eliminating or reducing these taxes. Yes, some have advocated a temporary suspension of FEDERAL taxes… but those taxes are fixed amounts per gallon anyway (they don’t increase proportionally as the price of gas increases.) I’m talking about SALES TAXES calculated as an additional percent of the sales amount.
Some will argue that higher prices have resulted in lower sales… but I haven’t seen much evidence of that. Demand remains quite high. If so, then government is actually benefiting from the increase in gas prices by gaining more tax revenue. Government is generally quick to investigate the private sector when they suspect “windfall profits”… but doesn’t say a word when the windfall comes their way.
