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EDITORIAL: Soaring fuel prices and the gasoline tax

House Democrats on Thursday passed a “price-gouging” bill to address high gasoline prices. Thankfully, this testament to progressive economic illiteracy will never become law.

But it presents an occasion to highlight the reality that many factors go into the price of any given product which have nothing to do with “corporate greed.” Take taxes, for instance.

Nevada currently has the fifth-highest gasoline taxes in the nation, trailing only California, Hawaii, Pennsylvania and Illinois. With a gallon of gasoline now costing an average of $5.24 in the Silver State, it also has the third-highest fuel prices in the country, behind California and Hawaii.

Currently, Clark County drivers pay 67.9 cents for every gallon of gasoline they purchase, which is distributed among the Regional Transportation Commission (20.79 cents), Clark County (8.243 cents), the state of Nevada (20.469 cents) and the federal government (18.4 cents).

In other words, Las Vegas area consumers pay an effective 13 percent tax on every gallon of gasoline — to local, state and federal sources — which is a higher “profit margin” than that enjoyed by retailers.

It’s also worth remembering that gasoline taxes are high in Nevada because residents apparently like it that way. In 2016, Clark County voters easily approved a ballot initiative, 56 percent to 44 percent, to tie the county portion of the fuel tax for the decade to a rolling average of the Producer Price Index. The move was expected to raise $3 billion for nearly 200 local road projects.

The PPI measures price fluctuations for domestic producers of goods and services. At the time the county ballot question went to voters, it was running about 4.5 percent a year, well above traditional inflation. Proponents of the tax hike estimated that it would increase the county levy by about 3.6 cents a gallon annually, boosting gasoline prices more than 36 cents by 2026.

In recent months, however, the PPI has skyrocketed to nearly 11 percent as the Biden administration’s economic agenda pushes the nation closer to recession. Wisely, the county ballot initiative capped annual increases at 7.8 percent or 4 cents a gallon. But if the PPI remains elevated over the coming months, the gasoline tax increases borne by local drivers will be higher than originally anticipated and are likely to reach the cap.

Whichever way gasoline prices go in the near future, one thing remains certain: The county tax will go up. On July 1, another adjustment will add 1.6 cents to the price of a gallon of gasoline in Southern Nevada, boosting the overall tax to 69.5 cents a gallon. No word on whether House Democrats are looking into the situation.

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