Gas Tax Reform Draws Close in Pennsylvania as Debate Continues in 3 More States

Update: Pennsylvania Governor Tom Corbett signed the gas tax increase described below into law on November 25, 2013.

One of 2013’s biggest state tax policy issues—the gasoline tax—continues to make headlines long after most state legislative sessions have come to a close for the year.  We’ve already written about how lawmakers in Maryland, Massachusetts, Vermont, Virginia, Wyoming, and the District of Columbia enacted gas tax increases or reforms earlier this year.  But within just the last week, four more states have been in the news with high-profile proposals to raise their own gas taxes—including Pennsylvania, which appears to be on the verge of both increasing and reforming its tax.  Here’s what’s been happening:  

Pennsylvania is one of a small number of states where the legislature is still in session (most state sessions ended this spring).  This week, both the Pennsylvania House and Senate passed a bill that would gradually raise the gas tax by allowing it to rise alongside gas prices, much like an ordinary sales tax.  This is not a new idea in the Keystone State.  Prior to 2006, Pennsylvania’s gas tax actually functioned in exactly this manner, though the 32.3 cent tax has since run up against a poorly designed gas tax “cap” that the legislature is now seeking to lift.  When combined with increases in vehicle registration fees, license fees, and traffic fines, the overall package is expected to raise $2.3 billion per year for roads and transit.  As of this writing the bill needs to be approved by the House one more time before going to Governor Tom Corbett’s desk where it is expected to be signed into law.

In Washington State, The Olympian is reporting that “a bipartisan transportation revenue package now looks possible” after the coalition of lawmakers in control of the state senate backed an 11.5 cent gas tax increase.  The tax increase would be phased-in over the course of three years and is actually somewhat larger than the 10 cent increase sought by Governor Jay Inslee and House Democrats earlier this year.  As we explained in June, Washington’s gas tax would remain relatively low by historical standards even if the Governor’s 10 cent increase had been enacted into law.  The same is true of an 11.5 cent increase.  Lawmakers could potentially act on the 11.5 cent plan within the next few weeks if a special legislative session is called.

Utah business leaders, local officials, and other stakeholders are continuing to make the case that public investments in infrastructure will help the state’s economy succeed, and that the gas tax is the best way to pay for those investments.  On Wednesday, local officials testified before an interim transportation committee in support of a plan to allow localities to levy a 3 percent gas tax.  Unlike Utah’s fixed-rate gas tax—which actually stands at its lowest level in history as a result of inflation—this 3 percent tax should do a reasonably good job keeping pace with future growth in the cost of transportation construction and maintenance.  At the same hearing, a Republican state representative testified in support of his own plan to raise the state’s gas tax by 7.5 cents per gallon, phased-in over the course of five years.

The gas tax has been a frequent topic of discussion in Iowa these last few years, and it doesn’t seem like that’s about to change any time soon.  As in Utah, Iowa’s gas tax is at an all-time low (after adjusting for inflation), but one of the state’s candidates for governor in 2014 would like to change that.  Democrat Jack Hatch has proposed raising the tax by a total of 10 cents over the course of 5 years.  Current Governor Terry Branstad, who is eligible to seek reelection next year, is noticeably less excited about the idea.  But Branstad has said he won’t veto a gas tax increase if one makes it to his desk.