“Contrary to media reports, Georgia’s gas tax change led to no price increase at the pump.”
Berry College economics professor E. Frank Stephenson in a Georgia Public Policy Foundation post on August 14th, 2015
Anyone who took a road trip over Labor Day couldn’t help but notice prices at the pump.
The national average of regular gasoline hovered at $2.40 a gallon over the weekend and dipped another penny to $2.39 a gallon by Tuesday, according to AAA.
Georgia matched that average, and Atlanta even fared better, with metro drivers paying an average of $2.34 a gallon.
That’s the lowest price since 2004 – despite a change in the state gasoline tax over the summer that critics warned was a tax hike for Georgia drivers. PolitiFact Georgia already ruled claims about a tax hike as Mostly True.
The chairman of Berry College’s economics department, writing for the Georgia Public Policy Foundation, suggested that media reports were “surprising” given the change would not and did not mean higher gas prices.
“Contrary to media reports, Georgia’s gas tax change led to no price increase at the pump,” according to the piece by economics professor E. Frank Stephenson and student Clay G. Collins. “There may well be some good reasons to criticize the transportation bill, but hiking gas taxes isn’t one of them.”
Did we miss something in our earlier assessment of Georgia’s gas taxes? We decided to revisit the issue and, sadly, the math.
Lawmakers changed how drivers pay gas taxes as of July 1. Switching from a 7.5 cent per gallon and excise tax and a 4 percent state sales tax to a single 26 cent excise tax on gasoline is projected to raise nearly $670 million this year.
In our previous fact-check, we noted that the effective rate then would jump from 17 cents per gallon to 26 cents, or 9 cents before local sales taxes are included.
Stephenson and Collins used AAA and gasbuddy.com to find monthly gas prices in Georgia and the surrounding states for June and July – before and after the change took place here.
In June, the research showed Georgians paid an average of $2.71 per gallon of gas. They paid about $2.63 a gallon in July – a drop of 8 cents after the change in how taxes are paid.
Stephenson and Collins used prices in Alabama, Florida, North Carolina, South Carolina and Tennessee as the control for market factors such as crude oil prices. They found the neighboring states’ average price per gallon was $2.59 in June and $2.51 in July.
In other words, Georgia saw the same drop in gas prices as its neighbors, even though it alone changed how it taxed gasoline.
In an email, Stephenson rejected the idea that change created a net tax increase, given those final prices.
“Market prices indicate otherwise because Georgia’s gas prices changed in line with neighboring states,” Stephenson wrote. “Your suggestion is that prices in neighboring states should have decreased 8-9 cents more than prices in Georgia but that just didn’t happen.”
The figures Stephenson uses in his analysis are easily verifiable. But does the price at the pump really mean taxes didn’t go up?
Not if you do the math, which PolitiFact Georgia did with the help of a second economist, Bruce Seaman, a Georgia State professor who specialties include public sector taxation.
Using Stephenson’s figures, we first looked at what would have happened if, in June, the new tax system was in effect.
That requires taking the $2.71 pump price, and subtracting the then-existing 7.5-cent excise tax to get to $2.62 and dividing by the state and local sales taxes of 7 percent. That leaves us with a $2.46 per gallon price, without taxes.
Under the new tax structure of a 26 cent excise tax and 3 percent local sales tax per gallon, the price would have been $2.79. In other words, there would have been about an 8 cent increase in the price if the new system was in place in June.
And in July? Applying similar math, the $2.63 pump price would have been $2.45 without any taxes. And under the previous tax system, the pump price would have been $2.54 – meaning motorists would have paid about 9 cents less had the tax structure not changed.
Seaman said while it was an interesting point that Georgia’s change in prices was similar to neighboring states, the data likely exaggerates the point that the tax increase is just not immediately evident.
“My dilemma is he concludes that Georgia did not experience a net tax increase, even though when holding market forces constant, the math suggests there was,” Seaman said.
Our ruling
Stephenson is correct that average gas prices dropped this summer in Georgia.
He used neighboring states to show that Georgia prices dropped the same as states that did not alter their gas taxes this summer.
That analysis, however, doesn’t indicate what sorts of market forces could depress pump prices, even as a growing share of that cost is taxes.
And, the math shows motorists paying several cents more per gallon than they would have under the former system.
If not for the tax change, Georgia motorists would be paying even less at the pump now.
Stephenson uses accurate numbers but leaves out critical facts that provide that important context.
We rate his claim Half True.
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