Saturday, May 28, 2011

Consumers forced to cut back discretionary driving such as to baseball games. 7 states make millions on higher gas prices via sales tax

"Every 50 cent jump in the cost of gasoline takes $70 billion out of the U.S. economy over the course of a year."... "There's less money this summer for hotel rooms, surfboards and bathing suits. It's all going into the gas tank.

High prices at the pump are putting a squeeze on the family budget as the traditional summer driving season begins. For every $10 the typical household earns before taxes, almost a full dollar now goes toward gas,

  • a 40 percent bigger bite than normal.

Households spent an average of $369 on gas last month. In April 2009, they spent just $201. Families now spend more filling up than they spend on cars, clothes or recreation. Last year, they spent less on gasoline than each of those things.

Jeffrey Wayman of Cape Charles, Va., spent Friday riding his motorcycle to North Carolina's Outer Banks, a day trip with his wife. They decided to eat snacks in a gas station parking lot rather than buy lunch because rising fuel prices have eaten so much into their budget over the past year that they can't ride as frequently as they would like.

"We used to do it a lot more, but not as much now," he said. "You have to cut back when you have a $480 gas bill a month."

Alex Martinez, a senior at Arcadia High School outside Los Angeles, said his family's trips to San Francisco, which they usually take once or more a year, are on hold. As he stopped at a gas station to put $5 of fuel in his car — not much more than a gallon — he said the high prices are crimping social life for him and his friends.

"We're always worrying, `How are we going to get home. We've got less than half a gallon left,'" Martinez said. "We definitely can't go out as much, and we can't go as far."...

  • A year ago, gas cost $2.76.

The squeeze is happening at a time when most people aren't getting raises, even as the economy recovers.

"These increases are not something consumers can shrug off," says James Hamilton, an economics professor at the University of California, San Diego, who studies gas prices. "It's a key part of the family budget."...

They're showing it by limiting spending far beyond the gas station. Wal-Mart recently blamed high gas prices for an eighth straight quarter of lower sales in the U.S. Target said gas prices were hurting sales of clothes.

Every 50-cent jump in the cost of gasoline takes $70 billion out of the U.S. economy over the course of a year, Hamilton says. That's about one half of one percent

  • of gross domestic product.

The Commerce Department reported Friday that consumer spending rose just 0.1 percent in April, excluding the extra money spent on more expensive gas and food, while wages stayed flat for the second straight month....

The median household income in the U.S. before taxes is just below $50,000, or about $4,150 per month. The $369 that families spent last month on gas represented 8.9 percent of monthly household income, according to an analysis by Fred Rozell, retail pricing director at Oil Price Information Service. Since 2000, the average is about 5.7 percent. For the year,

  • the figure is 7.9 percent.

Only twice before have Americans spent this much of their income on gas. In 1981, after the last oil crisis, Americans spent 8.8 percent of household income on gas. In July 2008, when oil price spiked, they spent 10.2 percent.

Average hourly earnings, meanwhile, have risen just 1.9 percent in the past year. That's only just enough to keep up with inflation....

"Drivers try to do what they can, but they have to go almost all the places they go," says David Greene, a researcher at the Center of Transportation Analysis at Oak Ridge National Laboratory and manager of the Department of Energy website fueleconomy.gov. "There's no magic gizmo that will drastically change someone's gasoline use.""...

  • ---------------------------------------------------------------
"California is one of seven states making millions of dollars more a month because of the recent spike in gasoline prices, reports the Tax Foundation, a Washington D.C. tax policy advocacy group.

The average American will pay $2,832 for gas this year, reports Register reporter Mary Ann Milbourn.

Every state charges excise tax on gasoline, the Tax Foundation says. But excise taxes are a flat rate per gallon, so taxes collected don’t change when gas prices fluctuate, the foundation says. In fact, tax revenues might decline as vehicle owners

  • curtail their driving when prices rise.

But seven states, including California, also charge a sales tax on gasoline, which is based on the dollar amount of the transaction, so as the price of gasoline goes up,

  • so do the tax revenues.
California’s sales tax rate on gasoline isn’t the highest in the nation, although its total taxes (including excise) on gasoline is the highest at 47.7 cents a gallon. California charges 2.35% sales tax on gasoline and local governments add 0.1% to 1%. By comparison, Connecticut and Indiana charge 7% sales tax. Michigan charges 6%. The other states that charge sales tax on gas are Georgia, Hawaii, Illinois, New York and Virginia."...
  • California "was collecting $87.42 million a month when gas was around $3.10
  • and collected about $112.8 million a month at $4 a gallon.

That’s almost $25.4 million a month.

The Tax Foundation calculates that Indiana, with the highest sales tax rate, is making 5 cents more for every gallon purchased or

  • $202 million in the past year."


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