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A sign at a gas station shows the price of gas in Minnesota over Labor Day weekend. Photo by Star Tribune via AP A sign at a gas station shows the price of gas in Minnesota over Labor Day weekend. Photo by Star Tribune via AP

A sign at a gas station shows the price of gas in Minnesota over Labor Day weekend. Photo by Star Tribune via AP

April Hunt
By April Hunt September 9, 2015

Georgia gas taxes up, despite pump price fall

Anyone who took a road trip over Labor Day – or paid attention to headlines over the holiday – 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.

The history

As a reminder, lawmakers changed how drivers pay gas taxes as of July 1, as part of a larger transportation funding bill.

Switching from a 7.5 cent per gallon and excise tax and a 4 percent state sales tax per gallon 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.

However, analysts at the right-leaning Tax Foundation pointed out that the price of gas would play a role in the final price.

In short, prices weren’t expected to jump 9 cents overnight. But the amount motorists paid would increase over time, as gas prices and inflation increased.

The Berry College analysis

Stephenson did something similar in his analysis. He and Collins (a student who did not return requests for comment) used AAA and 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."

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Math matters

The figures Stephenson uses in his analysis are easily, and readily 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 own 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 on every 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 per gallon – 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.

"I have to admit, as I’m sitting here right now, I don’t have a great explanation for why, even over one month, we benefitted more in the market than other states from the decline in refinery gas prices," Seaman added. "But that doesn’t change the math, that there is a net tax increase."

Stephenson did not respond to specific questions about the math but said the argument that the market is camouflaging the tax increase "relies on having some price decrease that was specific to Georgia, was the same magnitude as the putative tax increase, and was at the same time as the would-be tax increase."

An 18-month review of gas prices show that Georgia’s prices have increased relative to neighboring states but did not during the tax change, Stephenson added.

But Seaman said even that data had anomalies that "are not inconsistent with Georgia having bigger price reductions, without the tax change, and lower prices than other states."

Our ruling

In Atlanta’s car-centric world, gas prices are nearly as hot a topic as bad drivers.

So Berry College economist E. Frank Stephenson caught our attention with his piece that the change how Georgia taxes gasoline was "much ado about nothing" because an analysis of prices before and after the change show rather than increasing taxes, pump prices went down this summer.

"Georgia’s gas tax change led to no price increase at the pump," Stephenson wrote in dismissing warnings of a tax increase.

Stephenson is correct that average gas prices dropped this summer in Georgia, where we plunged to an 11-year low during the recent Labor Day weekend.

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 just what was predicted when Georgia switched to a higher statewide excise tax on July 1: 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.

Our Sources

Georgia Public Policy Foundation, "Georgia gas tax hike: Much ado about nothing," Aug. 14, 2015

PolitiFact Georgia, "Maybe not today, and maybe under a different name, but tax claim mostly on target," April 27, 2015

Georgia Department of Audits, Senate Revised Fiscal Note on HB 170, March 23, 2015, Fuel Gauge Report, accessed Sept. 8, 2015

Palm Beach Post, "Lowest Labor Day gas prices in 11 years boosted travel," Sept. 8, 2015

Email interviews, E. Frank Stephenson, professor of economics and department chair, Berry College, Aug. 26, 2015 to Sept. 1, 2015

Interviews, Bruce Seaman, professor of economics, Andrew Young School of Public Policy at Georgia State University, Aug. 26, 2015 to Sept. 1, 2015

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Georgia gas taxes up, despite pump price fall

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