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Our nation’s gas tax policy is horribly designed, and the consequences have never been more obvious at either the federal or state levels. Construction costs are growing while the gas tax is flat-lining, and the resulting tension has made even routine transportation funding debates too much for our elected officials to handle. Just last week, President Obama signed into law the ninth temporary, stop-gap extension of our nation’s transportation policy since 2009, and numerous states are similarly opting to kick the proverbial can down the crumbling road.
Much of our collective transportation headache arises from our “fixed-rate” gas taxes that just don’t hold up in the face of rising construction costs. The federal gas tax hasn’t been raised in over 18 years, and most states have gone a decade or more without raising their tax. There’s no doubt that we’re long-overdue for a gas tax increase, but political concerns have kept that option largely off the table. In addition to the embarrassing federal Band-Aid fix just signed into law by the President, here’s what we’re seeing in the states:
The Michigan Senate has voted to permanently take millions in sales tax revenue away from health care, public safety, and other services in order to complete basic road repairs. But as the Michigan League for Human Services explains, the state would be much better off modernizing its stagnant gas tax.
Both the Oklahoma House and Senate have voted to raid the general fund as a result of lagging gas tax revenues. These proposals are very similar to the one under consideration in Michigan, and when fully phased-in they would divert $115 million away from education and other services in order to improve some of the state’s wildly deficient bridges.
Luckily, Virginia lawmakers didn’t agree to Governor McDonnell’s proposal to raid the general fund in a manner similar to what’s being considered in Michigan and Oklahoma. But they also failed to enact a much smarter proposal passed by the Senate that would have indexed the state’s gas tax to inflation. It looks like rampant traffic congestion will remain the norm in Virginia for the foreseeable future.
Iowa and Maryland appear likely to follow Virginia’s lead and do nothing substantial on transportation finance this year. Iowa House Speaker Kraig Paulsen says that after much talk, a gas tax increase is not happening. And while Maryland Governor Martin O’Malley is trying hard to end almost two decades of gas tax procrastination in the Old Line State, it doesn’t look like the odds are on his side.
Connecticut lawmakers aren’t just continuing the status quo, they’re actually making it worse. Connecticut is among the minority of states where the gas tax actually tends to grow over time, since it’s linked to gas prices. But the Governor recently signed a hard “cap” on the gas tax that prevents it from rising whenever wholesale prices exceed $3.00 per gallon. Lawmakers in North Carolina briefly considered a similar cap last year, but as the Institute on Taxation and Economic Policy (ITEP) explains, blunt caps are very bad policy and there are much better options available.
For more on adequate and sustainable gas tax policy, read ITEP’s recent report, Building a Better Gas Tax.