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It may sound strange, but there are very few tax policy issues that generate support among lawmakers quite like a gas tax hike—at least at the state level. While the federal government may not be interested in raising its gas tax anytime soon, 19 states have enacted gas tax increases and/or reforms since 2013. And all signs are pointing toward that number growing in the months ahead.
Louisiana is among the states that will seriously consider a gas tax increase in 2017, and for good reason. At the start of next year, the state’s gas tax rate will officially become 27 years old. Only five states (Alaska, Oklahoma, Mississippi, South Carolina, and Tennessee) have waited longer since last updating their tax rates. Unsurprisingly, most of those five states will be considering gas tax increases next year as well.
Last week I had a chance to travel to Baton Rouge to speak with the Louisiana Governor’s Task Force on Transportation Infrastructure Investment. Part of that conversation (PDF) included a look at how growth in construction costs and improvements in vehicle fuel economy have combined to erode the purchasing power of Louisiana’s gas tax by 47 percent since 1990. And on top of that, we know with almost complete certainty that both of these developments are going to continue to impact the state’s gas tax in the years ahead.
The only way to shore up gas tax revenues for the long run in the face of inevitable inflation and fuel economy growth is to index the tax rate to inflation or some other economic measure. This sensible reform is growing in popularity. Five states (Maryland, Pennsylvania, Rhode Island, Utah, and Virginia) as well as the District of Columbia have adopted indexed gas taxes in just the last three years. Today most Americans live in states with variable-rate gas taxes of some type.
My presentation (PDF) dives more deeply into some of the details—including a discussion of how volatility can be avoided under an indexed gas tax. But it’s already clear that the big picture issues are well understood in Louisiana. Department of Transportation and Development Secretary Shawn Wilson says that in his extensive conversations with stakeholders and citizens thus far, “we hear people say we need to invest more” in infrastructure. And the means of generating that investment are becoming increasingly clear: “at all of the meetings there was a pretty vocal level of support for addressing the gas tax.”
