As You Pay More for Gas, Some States Enjoy a Windfall

May 11, 2006 — -- Everyone knows Saudi Arabia and Exxon Mobile are profiting from high gas prices.

But many drivers may not be aware that some state and local governments are making out as well.

While every state has a fixed gas tax, which ranges from 4 to 30 cents a gallon, there are 10 states that also have a percentage-based sales tax of from 1 percent to 6 percent of the price of a gallon.

In those states, every time gas prices go up, so do tax revenues.

"They've always got some sort of excuse to take your money," one driver told ABC News.

Another commented, "I think it's a complete joke."

In the last year, gas sales tax revenues were up nearly $100 million in California and Michigan, and more than $50 million in New York.

Some states, like California and West Virginia, dedicate the money to road repair and other infrastructure improvements. But New York and Connecticut simply put the added revenue back into the general pot.

In New York, the state with the highest gas taxes in the country, politicians talk about easing their constituents' pain and anger by cutting those taxes.

Many energy analysts say putting the brakes on gas taxes would actually drive prices up by increasing demand.

"Its sort of like the beer after the bender," energy analyst Bill O'Grady said. "It makes you feel better for a little while but it doesn't really get rid of the hangover."

Taxes in the United States are nothing compared with those in Europe, where many drivers pay the equivalent of $6.50 a gallon, with taxes accounting for 60 percent of that cost.

While it is unlikely that gas taxes will get that high here, they may not get much lower than the current rate, since governments have become as addicted to the tax dollars as drivers are to the gas.