States Need Money for Roads,
but Most aren’t Looking to Gas Taxes
State leaders are casting a wide net to find ways to bring in more money to fund badly needed transportation projects, but increasing the gas tax doesn’t seem to be high on many people’s list.
“I think it’s politically unpopular now because the gas price is already high,” said Dan Vock, staff writer for Stateline. Vock was one of the featured speakers on a recent CSG webinar, “States to Watch in 2013: Transportation Funding.”
“One of the trends I think we will see today is even when state leaders want more money for transportation, they’re exploring all their options,” Vock said. “The gas tax seems kind of like a natural place for you to go and they’re not always taking that. It is still in play in a number of states, but it is striking how many governors and legislators who are looking for money have ruled out the gas tax.”
A Bold Virginia
Sean Slone, CSG’s senior transportation policy analyst, said Virginia has a gas tax of 17.5 cents per gallon, which hasn’t been raised since 1986. The state Department of Transportation said it needs an additional $500 million in revenue yearly to stop borrowing new money to fund maintenance projects.
Ryan Holeywell, staff writer for Governing magazine, said Gov. Bob McDonnell proposed a transportation funding plan that is being described as bold and ambitious.
“The most significant part of the plan is that the governor wants to completely eliminate the state’s 17.5 cents per gallon gas tax and replace it with an additional 0.8 percent sales tax,” he said. “That would be unprecedented. There is no other state that has completely eliminated its gas tax.
“The other thing he wants to do is increase the proportion of the existing sales tax revenue that is dedicated to transportation,” said Holeywell.
Among the things McDonnell is considering is a $15 increase in vehicle registration fees and a new $100 annual fee for alternative fuel vehicles, “the idea being those vehicles historically haven’t paid as much gas tax because of their efficiency,” said Holeywell.
According to a Feb. 5 story in The Washington Post, the Virginia House of Delegates passed a version of McDonnell’s bill that eliminates the fee on hybrid cars, but keeps the sales tax increase and the elimination of the gas tax. The plan also would take $283 million out of the general fund for transportation by 2018, part of which would be replaced by Internet sales taxes if Congress can finally pass a law giving states the authority to make online retailers pay state sales taxes.
“There’s something in here everybody can hate,” Holeywell said. “If you’re a conservative, you don’t really like the idea of all this increasing in the sales tax. … If you’re a Democrat, you don’t like that it puts transportation in competition with education (for general funds). I think a lot of people are looking to Virginia to see if the governor has stumbled upon a plan that is absolutely crazy, or maybe it’s so crazy it works. The jury is still out.”
Massachusetts Goes Big
Massachusetts Gov. Deval Patrick also has a big plan this year, said Stephanie Pollack, associate director of research at Northeastern University in Boston.
“The governor has proposed to address the roughly billion dollar a year gap in the transportation budget as part of a larger package of tax increases, decreases and reforms,” Pollack said. “(It) would address not only transportation, but a half billion dollar operating budget deficit and increasing investment in education basically by increasing the income tax, actually decreasing the sales tax—over a penny of which currently goes to transportation—and doing some tax reform.”
According to a Jan. 18 story in The Boston Globe, the governor’s plan also would tie the gas tax to inflation, which would add a half penny to the state’s 21-cent gas tax.
Richard Parr, policy director of A Better City, a nonprofit business association located in Boston, said the business community is “actually coalescing around the idea of a gas tax at least being preferable to what the governor is proposing.”
“The irony in Massachusetts is that one of the strategies for getting a gas tax may be to propose an even worse tax,” Pollack said.
Wyoming Moving Ahead
Geoffrey O’Gara, a contributor to the news service WyoFile, said the Wyoming Department of Transportation has put together a “really tremendous operation in terms of the groups that are coming in to lobby for them.”
Wyoming has a gas tax of 14 cents per gallon, which hasn’t been increased since 1998. The department estimates it needs an additional $110 million annually to maintain the state’s roads, $332 million annually to improve them.
“The department and its supporters have basically come in to the legislature and said, ‘We need another 10 cents per gallon, then we won’t have to come to you every year begging for what we need simply to maintain the current road system,’” O’Gara said.
O’Gara noted that Wyoming is in a good place for a gas tax increase this year. Its tax is considerably lower than its neighbors and the state budget has been in good shape due to mineral severance taxes.
O’Gara said legislation to increase the gas tax already has passed the House and is expected to be coming to the floor in the Senate soon.
“It’s being received well this year,” he said. “It’s moving along.”