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The Honolulu Advertiser

Posted at 8:42 a.m., Thursday, July 5, 2007

Hawaii taxes on gas, cigarettes vary from other states

By ANDREA COOMBES
Dow Jones

SAN FRANCISCO — Drivers well know the pain of rising gas prices in recent months, but one cost hike most drivers don't have to contend with is higher gas taxes. In general, states haven't raised gas taxes in the past year, according to a new survey of state tax rates.

Generalities don't always offer solace. Just ask drivers in Washington state, where the gas tax jumped 2 cents to 36 cents a gallon this July compared with last July, according to the survey by CCH Inc., a Riverwoods, Ill., tax information publisher.

Seven states raised their gas tax rates in the past year, and Washington's 2-cent hike was the steepest. Meanwhile, drivers in Iowa and Nebraska saw their states' gas tax rates drop by fractions of a penny, according to CCH.

The national average for the cost of a gallon of regular gas is $2.95, off from the all-time high of $3.23 a gallon in May but still 3 cents higher than a year ago.

Gas taxes range from 7.5 cents a gallon in Georgia to Washington's 36 cents. More than half of the states charge 20 cents a gallon or less. The CCH survey focuses on taxes levied by states. There are plenty of other government agencies charging gas taxes, including cities and counties. There are often environmental fees too. Some states also charge a sales tax on gas.

For instance, New York drivers pay far more than that state's 8-cent-a-gallon tax, but the full cost varies by locale. In Hawai'i, local county taxes can double the 16-cent-a-gallon state tax rate, according to CCH.

States also held sales taxes relatively steady, said Daniel Schibley, an analyst with CCH. Most state sales tax rates did not change in the past year, though South Carolina and Idaho enacted hikes — both are now 6 percent — and North Carolina dropped its rate to 4 percent on Sunday from 4.25 percent.

But just as with gas taxes, cities and counties can have their own sales levies. Alabama, for instance, levies a 4 percent state sales tax, seemingly far lower than Mississippi's 7 percent rate. But if you make a purchase in Montgomery, Ala., you'll pay up to 10 percent in sales taxes, once a 2.5 percent city tax and 3.5 percent county tax are tacked on.

Meanwhile, Jackson, Miss., charges just the base 7 percent state rate.

Schibley said that state revenue is up sharply, in part due to stock market gains, so there is no need to raise taxes.

"High-net-worth individuals have seen their income go up a great deal," Schibley said. Plus, "property taxes are up a lot because of the increase in property values, and consumers are still shopping a lot so there is still a lot of sales tax coming in."

Also, when prices for taxable products go up, states enjoy a boon, collecting the same percentage on consumers' higher dollar outlay. And energy and food prices have risen in recent months, helping the states that levy sales taxes on food.

But the additional revenue hasn't stopped states' revenue-seeking efforts. Ten states hiked their cigarette taxes over the past year, with some states more than tripling their cigarette tax rate.

Cigarettes are "politically unpopular, socially unpopular," Schibley said. "The states can raise taxes on cigarettes without fear of a political backlash for raising taxes. It's not like raising the income tax or the sales tax."

New Jersey's tax of $2.575 a pack — an 18-cent increase from a year earlier — tops the list, but most states now charge more than 80 cents a pack, while 21 states charge $1 or more a pack. Eight charge $2 or more a pack.

Iowa, Tennessee and Texas more than tripled their rates, although the resulting tax varies widely: Iowa's cigarette tax jumped to $1.36 from 36 cents. Tennessee's rate rose to 62 cents from 20 cents. And Texas' rate climbed to $1.41 from 41 cents a pack.

Alaska raised its rate by 20 cents to $2. Arizona's rate jumped 82 cents to $2. Connecticut's 49-cent hike brings its rate to $2. Hawai'i's rate increased 20 cents to $1.60. Indiana's rate rose 44 cents to 99.5 cents. Vermont's rate increased 60 cents to $1.79.

Note that, as with other tax rates, city and county taxes could lead to a higher total cigarette tax rate.