There is something wrong when state government can increase taxes significantly without a vote of the Legislature. Such happens every now and then when the wholesale price of gasoline surges.
Here is how it works: West Virginia charges an excise tax of 5 percent of the wholesale price on every gallon of gasoline sold. The tax for one year is based on the average wholesale price from July 1 to Oct. 31 of the previous year. This year, gasoline is selling at record high prices. Gov. Joe Manchin's administration has estimated that the excise tax could increase by as much as 6 cents in January.
Currently, West Virginia charges 32.2 cents per gallon tax on gasoline. Part of that is a flat rate of 20.5 cents per gallon. The other 11.7 cents is the excise tax. A 6-cent increase would bring West Virginia's total gasoline tax to 38.2 cents per gallon. That would be in addition to the 18.4-cent federal tax and would make West Virginia's tax higher than that of any neighboring state.
Two years ago, Manchin suspended a scheduled increase in the tax because of high prices, but he has not done so since. Suspending another tax increase would require an act of the Legislature, and that is on the agenda for this week's special session.
There is a down side to suspending the increase in the excise tax. Fuel taxes pay for road repairs and improvements. When Manchin suspended the increase two years ago, that cost the Division of Highways about $53 million. This year, he plans to use $40 million of the state budget surplus to make up for what would be lost in excise taxes.
There's no question people need relief at the pump. Gasoline prices now are at near record highs in the Huntington area. The record highs were recorded in the days leading up to Memorial Day. Typically, late spring and late summer are times of highest retail prices.
Not only do consumers pay more, but businesses must pay more, too, when they fill up. Nationally, businesses are beginning to add fuel surcharges to the cost of their services to make up for their own added fuel costs. So consumers get hit twice.
While the Legislature's action to have a one-year moratorium on the excise tax increase is welcome, it nevertheless raises other questions. First, what happens if wholesale prices remain high for another year? Will motorists be stuck with a larger increase in 2010?
Second, and more important, is how the excise tax works. There should be no way that consumers should pay an additional 6 cents per gallon in gasoline taxes without a vote of the Legislature. An excise tax functions well when prices are flat or rising slowly. When prices take a huge jump upward retail prices in Huntington have doubled in four years excise taxes must be reviewed.
If this is not addressed during the special session, it needs to be taken care of when the Legislature meets in regular session early next year. There should be no automatic tax increases of that size. The Legislature has to review its excise tax on fuel.
