Taxes Matter VIII: Gas Taxes and Cost of Living


In a recent op-ed in the Bangor Daily News, I argued that taxes are a major driver of an area’s cost of living. An article today on reinforces that idea.
The article states: “Then there’s the taxes. At just 14 cents a gallon, New Jersey has one of the smallest state gas taxes in the country. The national average is about 21 cents, according to The federal gas tax is 18.4 cents per gallon. In Pennsylvania, which sits just next door to New Jersey and has several refineries of its own, the average price is $3.073 a gallon, according to the motorist organization AAA. That’s about 13 cents higher than New Jersey’s $2.947. The difference is clearly due to the tax. In Pennsylvania, it’s 17 cents higher. So minus the tax, New Jersey gas station owners are getting 4.5 cents more per gallon.”
In a nutshell, Pennsylvania’s gas tax is driving up the price of gasoline. Since gasoline is a major component of the cost of living index, higher gasoline prices mean a higher cost of living.