We retired Tax Justice Blog in April 2017. For new content on issues related to tax justice, go to www.justtaxesblog.org
Earlier this year, copious potholes on highways and roads due to severe winter weather conditions exposed the harsh truth about our nation’s transportation funding: there’s not enough of it, and potholes and other crumbling infrastructure could become the norm if the states and the federal government don’t address the issue.
Twenty-four states have gone a decade or more without increasing their gas tax, and 16 states have gone two decades or more without an increase. The last time Congress increased the federal gas tax was in 1993.
A blog in Wednesday’s Washington Post pondered whether now is the time for the federal government to raise the tax since gas prices have dropped to levels last seen four years ago. While there will not be any movement on the federal level in the short term, a couple of states are weighing increases.
South Carolina Gov. Nikki Haley and a majority of House members have historically refused to increase the state’s gas tax, but The State newspaper reported that lawmakers are increasingly recognizing that the South Carolina’s transportation infrastructure needs are woefully underfunded. Perhaps a hike in the gas tax isn’t that unrealistic. A state Department of Transportation report released earlier this year found that the state needs to generate an additional $43 billion over the next 25 years to meet those needs.
South Carolina’s gas tax is one of the lowest in the country (PDF) and hasn’t been raised in more than 25 years. After adjusting for inflation, ITEP found that the state’s current gas tax is lower today than at any point in history – going all the way back to the tax’s creation in 1922. For example, while the 2 cent gas tax that South Carolina levied in 1922 may sound very low to today’s drivers, in the context of the 1922 economy it was actually higher than the 16 cent gas tax South Carolina levies today. In fact a 2-cent tax in 1922 is roughly equivalent to a 28.3-cent tax in today’s dollars. Simply restoring the South Carolina gas tax to the same inflation-adjusted levels would represent a big step toward fully funding the state’s transportation needs. More and more states are realizing that undoing inflationary tax cuts is the most straightforward way to keep their infrastructure from crumbling beneath their feet.
In Michigan, Governor Rick Snyder is putting pressure on the House of Representatives to follow in the footsteps of the Senate and pass legislation that would replace both the state’s current 19-cent gas tax and 15-cent tax on diesel with a tax on the average wholesale price of gas. Based on current gas prices the tax rate would increase to 44 cents in 2018 and raise an additional $1.2 billion for transportation by 2019. The Governor admits this is asking representatives to take a “tough vote”, but it’s one that the Senate already took by a nine-vote margin (23-14). Gov. Snyder said of the state’s infrastructure crisis, “Every day that passes it’s only going to get worse. Pothole season isn’t going to be any better next year.”
Because this legislation links the gas tax to the wholesale price of gas the state is putting itself in a better position to ensure that transportation funding keeps up with inflation overtime.
Policymakers in South Carolina and Michigan aren’t alone in their quest for dealing with infrastructure woes. ITEP’s report State Gasoline Taxes: Built to Fail, But Fixable concludes that the poor design of gas taxes “has resulted in sluggish revenue growth that fails to keep pace with state infrastructure needs.” ITEP recommends raising gas taxes especially in states that haven’t increased their taxes in several years, restructuring gas taxes to take into account increased fuel efficiency and construction costs, and offsetting regressive gas tax hikes with targeted low-income tax relief.
In this political environment, tax increases may be a tough sell. But roads aren’t going to fix themselves, and the D-grade results of inadequate transportation funding will only get worse. States and the federal government should present and consider serious policy proposal for raising gas taxes to repair our nation’s roads and bridges.