Counties play role in high gas prices
By not capping tax, they magnify rise in pump prices
By Fred O. Williams NEWS BUSINESS REPORTER
Updated: 12/09/07 7:45 AM
Robert Kirkham/Buffalo News
It costs Ron Richards of Lancaster about $50 to fill the tank of his Buick, but as a retiree he can cut back on driving to save money, he says.
One reason behind rising gasoline prices is right here at home.
Local governments in Erie, Niagara and other counties are raking in more sales tax per gallon as fuel prices rise.
Local taxes are the only ones still based on a percentage of the price of gasoline — 4.75 percent percent in Erie County.
New York state capped its sales tax on gas at 8 cents a gallon in 2006, to avoid ratcheting up the burden on drivers. Counties could choose to follow suit, but only 11 opted in.
That decision staved off fiscal problems for cash-strapped local governments. But it doesn’t win applause from motorists these days, as fuel prices approach record territory.
“They need to cut that,” utility worker Nancy Lafornara said about gasoline taxes. The Lancaster woman was filling up her mid-size sedan on Main Street in Buffalo, an expense that has gone from $20 a tank to about $35.
“When you travel you see that other states don’t pay nearly what we pay,” she said.
At 59.3 cents per gallon, gas taxes in New York are the third-highest in the country, according to the American Petroleum Institute, an oil industry group. The total includes federal, state and local levies.
“It hurts,” retiree Ron Richards said of higher fuel prices. His Buick costs about $50 to fill up, but he can curtail trips to save, he said.
The average price of a gallon of regular was $3.29 Friday in Western New York, up from $2.50 at the beginning of the year, according to the AAA Daily Fuel Gauge report.
A windfall for county
Based on that, sales tax in Erie County has climbed from an estimated 10.7 cents a gallon at the beginning of the year to 14.06 recently, a 31 percent increase. The figures use an estimate of wholesale prices, on which the tax is based, at 90 percent of the pump price.
The rising cost of fuel may be contributing to a surge in tax revenue for Erie County, Comptroller Mark C. Poloncarz said. Sales tax revenue is up 5.15 percent for the first nine months of the year.
However, he said, gasoline’s contribution is too small to explain much of the jump. He attributes the increase to higher retail sales, based on feedback from retailers.
The source of the increase isn’t known because it takes about a year for the county to receive a breakdown of sales tax collections from the state, which collects on behalf of local governments.
In Erie County, gasoline contributes between 7 percent and 8 percent of the $625 million total intake from sales tax, according to 2006 figures. Forty-six percent of sales tax revenue is shared with towns and villages.
Whether to revisit the cap “is not my call,” Poloncarz said. “It’s up to the county legislature and county executive to decide.”
At current prices, Erie and local governments stand to collect about $10 million more than they would have if gas had remained at $2.50. That’s based on local consumption of 351.4 million gallons in 2005, the latest figure available from the state Energy Research and Development Authority. This year’s consumption will likely be lower as drivers strive to conserve.
“It’s something we think needs to be looked at,” said Wally Smith, president of AAA of Western and Central New York. “As these prices go higher and higher, [local governments] are getting a windfall.”
In the Albany area, one of the few metropolitan counties to cap its gasoline sales tax, pump prices are a few cents lower than in Western New York, he said.
State law provides for penalties up to $5,000 a day for businesses that fail to pass on a decrease in sales tax to consumers.
Would cap really matter?
But some critics of a cap dispute the benefit to drivers. Since capping its sales tax on gasoline last year, Chautauqua County hasn’t seen a break on prices, County Executive Greg Edwards said.
“I do not believe Chautauqua County is seeing any benefit,” he said. The 8 cent per gallon cap cost the county about $800,000 in yearly revenue, he said, yet pump prices in neighboring Allegany County are frequently lower.
fwilliams@buffnews.com
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