Pennsylvania taxes on fuel, diesel to rise for 2nd straight year after big drop in 2014 price

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HARRISBURG, Pennsylvania — Wholesale taxes on gasoline and diesel in Pennsylvania are set to take another step higher, the second of three increases that a sweeping 2013 law imposes over three years to boost funding for highway, road and bridge construction.

Gasoline taxes will go up on Thursday by almost a dime per gallon, while diesel taxes will rise by 13 cents per gallon for the second straight year, according to the Department of Revenue.

A series of tax and motorist fee increases in the law are designed to raise $2.3 billion a year, an increase of about 40 percent over what the Pennsylvania Department of Transportation had been spending to build and repair highways and bridges.

Primarily, the new money is designed to stem a rising backlog of needed repairs or modernizations to bridges, highways and mass transit agency facilities. Proponents of the law, including major business advocacy groups, had warned that, without more money, the state was risking a loss of commerce and quality of life, and possibly a catastrophe.

A small slice of the money goes to airports, ports, railways, and walking and cycling routes.

Gov. Tom Corbett signed the law in November 2013. It struggled to get through the House of Representatives amid concerns over the size of the tax increase, but gas prices have come down dramatically in the year since the first increase went into effect.

"Fuel prices have moderated so people are paying less than they did last year but at the same time we have a steady revenue stream that is paying huge dividends for Pennsylvanians," Department of Transportation spokeswoman Erin Waters-Trasatt said.

According to AAA, the price of gas in Pennsylvania averaged $2.58 per gallon on Tuesday, down about 90 cents from a year ago. Diesel was averaging $3.39, down about 60 cents from a year ago, according to AAA.

The Corbett administration has argued that retailers might not pass all of the tax increase on to consumers, but retailers have disputed that.

The cost of the increase will eventually get passed along, unless a retailer wants to absorb a loss in a short-term bid to lure more customers, said Jeff Lenard of the National Association of Convenience Stores in Alexandria, Virginia.

"But with profit margins at 3 or 4 cents (per gallon), there really isn't much play that a retailer has," Lenard said. "You can't get rich selling gas at a loss and you won't stay in business long."

In 2014, tax and fee increases pumped $800 million more into transportation, including improvements to about 1,600 miles of pavement and 83 bridges, the Department of Transportation said. In addition, more than 100 bridges had their weight restrictions removed in 2014, the department said.

Overall, the department issued $2.6 billion in highway and bridge contracts in 2014, compared with $1.6 billion in 2013.

A third tax increase will take place in 2017. Pennsylvania is already among the states with the highest fuel taxes.

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