Gov. Nathan Deal has had a welcome change of heart about another hike in the state tax on gasoline after reaping a windfall from a formula-induced jump of nearly 28 percent less than two months ago.
Deal signed recently an executive order freezing the tax at the current level of 12.9 cents a gallon, preventing an increase of 1.6 cents, or 12 percent, that would have hit consumers under a formula tying the tax rate to the six-month average price of fuel. The freeze will save drivers about $40 million, according to the governor’s office.
It’s a case of better late than never. Deal refused to suspend the gasoline tax two months ago, allowing it to jump 2.8 cents a gallon – a whopping 28 percent – on May 1 when prices were much higher. It was a major inflation penalty for consumers, while the state took in a huge revenue windfall as a result of the tax hike based on average gasoline prices over the previous six months.
At that time, Deal passed the buck. He said the issue of suspending the tax increase was “something the General Assembly should take up rather than the governor just ad hoc on his own taking action on it.” The earliest the legislature could have taken up the question would be at a special session expected in August to deal with reapportionment.
Meanwhile, Georgians have taken a major hit from the jump in the gasoline tax even as inflation keeps shrinking household purchasing power.
Now the explanation from Deal’s press office is that he acted because (1) the state sales tax would be increasing while the price of gasoline was falling and (2) Georgians had been hit with the May tax hike. The governor decided that taking action on his own without waiting for the General Assembly was okay if gasoline prices were declining.
The pesky tax-hike formula was enacted in 2003 early in the administration of Sonny Perdue, Georgia’s first Republican governor since Reconstruction. The law decrees an increase in the tax when the retail price changes by 25 percent or more within six months, setting up the scenario where the state benefits from higher inflation even as Georgians struggle with rising prices across the board.
To Perdue’s credit, when gasoline prices soared to nearly $4 a gallon in 2008, he suspended the looming 2.9 cents a gallon tax hike, a 28 percent jump that would have generated a $70 million to $80 million windfall.
Perdue recognized that such a whopping tax hike would “impose significant financial burdens on all Georgians and Georgia’s businesses.” That would have been a good lead for Deal to follow in May, but at least he got it right the second time.
All of which suggests there should be a second look at the gasoline tax formula. Why should Georgians be saddled with a fluctuating tax instead of a fixed rate that is predictable and does not inflict an inflation penalty?
That’s a question, as the governor said, that the General Assembly should take up – no later than the 2012 session.