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NFIB MA Testifies in Favor of Ending Gas Tax Indexing

Date: January 28, 2014

Testimony of

 

Bill Vernon, State Director, National Federation of Independent Business

In Support of House Bill No. 3847, an Act to Repeal the Indexing of the Gas Tax  

 Before the Joint Committee on Revenue       

January 28, 2014  

 

Senate Chair Rodrigues and House Chair Kaufman and the Members of the Joint Committee on Revenue:    

 

My name is Bill Vernon. I am the Massachusetts Director of the National Federation of Independent Business (NFIB). A non-profit, non-partisan organization, NFIB is the nation’s and Massachusetts’ largest small business advocacy group. In Massachusetts, NFIB represents thousands of small and independent business owners involved in all types of industry, including manufacturing, retail, wholesale, service, and agriculture. The average NFIB member has five employees and annual gross revenues of about $450,000.  In short, NFIB represents the small Main Street business owners from throughout Massachusetts. On behalf of those small and independent business employers in the state, I urge you to support House Bill No. 3847 to repeal the indexing of the gas tax to inflation.  

 

NFIB opposes indexing the gas tax to inflation for two reasons: first, the automatic adjustment, almost invariably upward, of the tax rate is bad government. Future legislators will be elected to establish public policy, including the appropriate rate of taxation. Those future legislators should be able to assess current societal conditions – including, for example, the cost of gasoline and the rate of usage of gasoline as an energy source for transportation – to determine the proper tax rate without facing an automatic increase. Legislators are elected to make decisions – sometimes difficult ones – and policy should not be placed on autopilot.

 

Secondly, the extent of the economic impact of a tax increase on gasoline is dependent on when the increase occurs in the economic cycle. Like increases in the minimum wage, increasing the gas tax during a recession, and especially as we enter an economic downturn, will do more economic damage than an increase during an expansion. The automatic annual adjustments based on inflation will not account for the economic cycle timing.

 

Furthermore, the gas tax will be based on changes in the national Consumer Price Index, which is a national number that may or may not accurately reflect the economy in Massachusetts. During the past decade, Massachusetts has faced real estate prices both on the up side and the down side that were far different from the experience in Arizona, Florida, Nevada and California. Massachusetts gas tax rate will inevitably be skewed by the national CPI. Like real estate and food, the price of gasoline is often volatile, often local, and often not reflected accurately in local or national computations of the rate of inflation, leaving no logical relationship between changes in the consumer price index and the rate of taxation of gasoline in Massachusetts.    

 

I urge you to support repealing indexing of the gas tax. Thank you.

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