Pain at the pump: At least it’s no new taxes

It might be tough to muster a grin when pumping gas these days, but there is one consolation: The tax man’s take on a tank hasn’t changed.

In Mississippi and almost all other states, state and federal excise fees are per-gallon, not per-dollar.

The rate in Mississippi remains 37.2 cents for gasoline and 43.2 cents for diesel. Those numbers include the federal assessment of 18.4 cents for gasoline and 24.4 cents for diesel. So it doesn’t matter whether the total price for 10 gallons is $20 or $40, the tax is a constant $3.72 for gas and $4.32 for diesel.

Overall, Mississippi is a little less than halfway between the highs and lows when it comes to fuel taxation. California is at the top at 63.9 cents. Alaska is at the bottom at 26.4 cents.

That’s not true for groceries, however, or many other purchases people make. The state’s general sales tax is 7 percent, tied for the highest in the nation. Because it is a percentage tax, when a pound of hamburger meat costs $2, the state adds 14 cents. When that same pound of hamburger costs $3, the state adds 21 cents.

It’s by this simple formulation that Mississippi and most other states have built-in cushions against inflation. Tears may be shed in legislative chambers across America – especially when cameras are rolling – about “devastating impacts of higher prices on working families,” but they are alligator tears. Usually, the more stuff costs the better for the state’s treasuries – and few managers of public purses are of the opinion that less government revenue is needed.

In part due to energy costs – and residential utility bills are also exempted from sales tax in Mississippi – what has been a good system for the state treasury to date may not be working out so well.

Here’s why: To the extent that Mississippians are putting more and more of their income into heating, cooling and commuting costs, most will be spending less and less on groceries, at restaurants, clothing stores and such. While the state’s revenue rises in proportion to higher prices on goods and services subject to the sales tax, it may not rise enough to offset the fact that fewer goods and services are being purchased.

As for the tax at the pump, much of that revenue doesn’t go into the general fund anyway, but to special funds for road and highway construction and maintenance. As people reduce discretionary driving more and more, those funds will also decline.

Mississippi’s susceptible

Without making those specific observations, the Rockefeller Institute of New York, which tracks and analyzes state and local revenue and spending patterns, ranks Mississippi among the states taking the hardest hit as the economy weakens. In other words, we’re highly susceptible.

This information wasn’t lost on Gov. Haley Barbour, who has been singing a tune called “All The Good Times Are Past and Gone” for many months. In this year’s session, the Legislature joined him for the chorus.

Over the past decade, state revenue has been more akin to a roller coaster than anything else. The national economic boom of the 1990s fed double-digit percentage increases in revenue for consecutive years and lawmakers managed to find a home for every dime. The General Fund portion of state spending doubled to $4 billion. Then bad times came during the four years of former Gov. Ronnie Musgrove and the economy didn’t start turning around until Barbour’s first year. Then came Katrina – an event no one wanted, but one that nonetheless pumped billions into the state economy. The double-digit percentage increases in state revenue resumed – until this year.

For the year ahead, lawmakers have adjourned after adopting a General Fund spending plan of more than $5 billion, but just slightly more than the current plan. They decided to ignore that $70 million is needed by Medicaid in the next 60 days, perhaps hoping a miracle will occur. Including special fund collections and federal revenue, the state will have about $15 billion to spend in the 12 months starting July 1. For those who like statistics, that puts the cost of state government at about $5,000 per person in 2008. (Medicaid alone will account for $3.9 billion or $1,300 per person.)

But the never-ending increases won’t show up as part of what we pay at the pump.

There, while watching numbers whir into the stratosphere, we can take at least a little comfort in knowing the tax man’s take from each gallon isn’t rising.

Not yet anyway.

Charlie Mitchell is executive editor of The Vicksburg Post. Write to him at Box 821668, Vicksburg, MS 39182, or e-mail cmitchell@vicksburgpost.com.