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Georgia Gas Tax Audit

By November 2, 2016May 22nd, 2024News and Articles, Sales Tax

Georgia Gas Tax Audit
One of the most significant bills enacted by the Georgia Legislature in 2015 was the nearly billion-dollar Transportation Funding Act of 2015 (HB 170). A key provision of the bill was a change in Georgia’s gasoline tax, taking effect on July 1.
Before the change, Georgia had a two-part gas tax: a 7.5 cents per gallon excise tax and a 4 percent state sales tax. Gas was also subject to local option sales taxes, which run another 3 percent in most counties. Levying gas taxes as a percentage of the purchase price had drawbacks. One was difficulty in transportation planning because tax revenue fluctuated with gas prices. Another was the perverse feature of having the tax increase when gas prices increased, leading to additional strain on family budgets.
Beginning on July 1, Georgia replaced its existing gas tax system with a pure excise tax of 26 cents. At prices of about $2.50 per gallon, the 26 cents per gallon tax is roughly equivalent to gas taxes levied under the old system. Taking 7 percent (4 percent state sales tax plus 3 percent local option sales tax) of $2.50 and adding 7.5 cents gives a total tax of 25 cents per gallon.
Yet the change was greeted by media reports of Georgia’s “first gas tax increase since 1971″ and warnings that “drivers should expect around a 6-7 cent increase” when filling their tanks. These claims are surprising, considering the tax change should have resulted in little change at current prices.
Using and AAA’s Fuel Gauge Report, we gathered data on gas prices to determine whether media reports of a tax hike are justified.
The accompanying table shows average gas prices in Georgia and its five neighboring states. The table covers both June and July, the months immediately before and after Georgia’s tax change. Consumers’ demand for gas is very inelastic, so gas taxes are almost completely passed along as higher gas prices. If Georgia’s gas tax change amounts to a tax hike, there should be an increase in Georgia’s gas price relative to our neighboring states.
Georgia Gas Tax Audit

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