Fact check: State transportation budget raises taxes on gasoline

Mar 11, 2022

Claim: “I promised we would not raise gas taxes on struggling families. … Today we passed a $17 billion transportation investment package that kept my promise.” – Sen. Marko Liias

Truth: The transportation package is directly funded by taxes on gasoline, amounting to a $5.4 billion tax increase over upcoming years.

With so much rhetoric about moving the state away from gas-powered vehicles to reduce CO2 emissions, one of the strangest claims made during the legislative session was that there was no increase in “gas taxes.”

Various versions of this claim appeared.

At best, it is misleading, but in many cases it is false.

The transportation package specifically relies on an increase in taxes on gasoline as legislative documents and the Department of Ecology admit.

The $17 billion transportation package has several funding sources. The legislative analysis shows the largest is funding from the “Climate Commitment Act,” the state’s new CO2 cap-and-trade program passed last year (SB 5126).

Senator Liias, who chairs the Senate Transportation Committee, even admits this is the case. On February 10, 2022, he tweeted the transportation budget is funded from “the bill we passed last year” – SB 5126.

This isn’t an accident. Funding from SB 5126 was specifically put into the Carbon Emissions Reduction Account, which was dedicated to a future transportation package.

Sure enough, the transportation package specifically cites funding from the Carbon Emissions Reduction Account.

Where does the money for the Carbon Emissions Reduction Account come from? It comes from a tax on CO2 permits sold by the state. As the Department of Ecology explains, transportation (gasoline and on-road diesel) is the largest category of CO2 emissions in the state. The fiscal note for SB 5126 shows that transportation fuels account for nearly 47% of emissions from covered entities.

Put simply, the tax on gasoline in SB 5126 was raised for the specific purpose of funding this transportation package.

The fiscal note estimates the lowest price for those CO2 permits will be $20.60 per metric ton (MT) of CO2. Each gallon of gas emits 19.4 pounds of CO2 when combusted, which translates to 18.3 cents per gallon at $20.60 per MT.

This is confirmed by the California Legislative Analyst’s Office, where they already have the cap-and-trade system Washington will implement next year. In 2016, they wrote, “We assume that retail gasoline prices increase by 8 cents to 9 cents per gallon and diesel prices increase by about 10 cents per gallon for every $10 per metric ton of carbon dioxide equivalent that an allowance costs.” Washington’s price is projected to start at just over $20.

Legislators know the tax on CO2 increases prices. Indeed, they want to increase prices on gasoline to encourage people to switch to electric vehicles. In other words, raising the price of gasoline isn’t a bug, it is a feature. To deal with those increases, SB 5126 specifically authorizes money to offset the increased cost of gasoline and other energy, including programs to “reduce the energy burden of people with lower incomes, as well as the higher transportation fuel burden of rural residents…”

How, then, can legislators like Liias repeatedly say there is no “gas tax” increase? He and others repeating this message rely on a technicality. A “gas tax” refers to a specific type of tax directly on gasoline that goes into a dedicated account for roads. That narrow definition makes the claim there is no “gas tax” increase technically accurate. It is, however, intentionally misleading because the transportation package is funded directly by taxes on gasoline. For drivers, the difference between a “gas tax” and a “tax on gasoline” is zero.

Liias is clearly attempting to use confusion about the definition of a “gas tax” to mislead people. He says he doesn’t want to impact “struggling families.” For those families, however, there is no difference between an 18-cent-per-gallon gas tax and an 18-cent-per-gallon tax on gasoline.

With the dramatic increase in gas prices and elections this fall, it is not surprising that some legislators who last year bragged about increasing the price of gasoline to reduce CO2 emissions are now pretending they didn’t do that. In the face of unfavorable polling, last year’s climate warriors lost the courage of their convictions.

I have been a consistent advocate of putting a price on CO2 emissions that would increase the price of gasoline, offsetting that increase with a reduction in other taxes, like the sales tax. We also support eliminating wasteful subsidies to reduce the overall tax burden on Washington families. A carbon tax offset by other cuts would incentivize a reduction in CO2 emissions, leaving families with more money in their pocket and the ability to cut their taxes by becoming more energy efficient. Voters have rejected that approach, however, in part because they simply don’t trust politicians to stick to the deal. And with the intentionally misleading comments by legislators about the taxes that fund the transportation package, who can blame them?

Ultimately, the insinuation that the transportation package was funded without increasing taxes on gasoline is dishonest and, starting next year, Washington state drivers will pay the price.

Sign up for the WPC Newsletter