Rising Gas Prices May Blow Budget

State revenues have been inching up above projections for several months, but revenue figures may take a nosedive this summer. The problem is that higher gasoline prices may blow a hole in the state budget. Yes, the state will pay more for gas as it climbs above $4. But the real problem is that if gas is $4 instead of $2, that’s two dollars a gallon not spent on something else. And in Tennessee, the something else means paying sales tax. Higher gas prices do not increase gas taxes, in fact it depresses demand. And money spent on gas rather than groceries or retail items means a decrease in sales tax collections. So sales taxes may take a major hit.

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