The Commonwealth has collected more than $800 million in revenue from the sale of motor vehicles ($422 million) and the gasoline excise tax ($391.6 million) in the first eight months of FY12.
But the two sources of revenue have been trending in opposite directions: sales tax revenue from motor vehicles is up $33 million for the first eight months of FY12, while gasoline excise tax revenue is down almost $5 million in that same period.
Taxpayers are buying motor vehicles, but they are also pumping less gasoline into them.
A year ago, with cost of a gallon of gasoline approaching $4 a gallon — just as it seems to be doing today after a price fall-off that saw a gallon sell for $3.35 a gallon as recently as three months ago — conventional wisdom was that tax revenue from the gasoline excise tax would go down as the price went up.
However, the data disputed that notion; a year ago, gasoline excise tax collections were up, not down, and they finished FY11 at $581.7 million, $3.4 million more than in FY10.
In a post dated March 11, 2011, this blog noted that “Economists note that consumers react to price hikes not with quick action, but with measured, more long-term responses, especially if price spikes become permanent price hikes. Drivers may choose to purchase more fuel efficient vehicles, change to public transportation, or move closer to their workplace. There are other factors, such as household disposable income.”
A year later, in March 2012, it may well be that consumers have responded by cutting down slightly on gasoline consumption, but the fact remains they are still very much buying motor vehicles.
By the way, a year ago Massachusetts gasoline excise tax of 21-cents per gallon ranked 27th (with No.1 the highest); today, Massachusetts with the same excise tax, ranks 29th, according to the Tax Foundation.