States Stepping Up to the Pump With Gas Tax Increase

“Look, people get it. People understand that we have to invest in infrastructure if we want to remain economically competitive...You’ve got to send Congress a permission slip that it’s OK to raise money for infrastructure.”

That's what former Gov. Ed Rendell (D-Pa.) — and current Building America’s Future co-chairman — said at a recent forum on transportation in Jacksonville, Fla. The 'permission slip' comment was a veiled jab at politicians who refuse to accept that raising the federal gas tax is the least we could do to generated badly needed funds to repair and upgrade our nation's transportation infrastructure. As I have blogged before -- here and here --this definitely should happen but unfortunately it won't any time soon.

Due to inaction at the federal level, some states are taking steps to address their transportation budget shortfalls by moving to raise their own fees on fuel purchases. In Rendell's own Pennsylvania, for instance, legislators are defying the governor by pushing a bill to pay for infrastructure by having drivers pay more at the pump. Saying Pennsylvania's deteriorating roads and bridges deserve a higher priority than the governor has given them, Democratic State Rep. Mike Hanna put it bluntly: "If Gov. Corbett is choosing not to lead on this issue, then it is time for the Legislature to take action."

Rep. Hanna added that raising the state's 32.2 cents-per-gallon tax is an idea taken directly from Republican Gov. Corbett's advisory commission, which recently outlined a plan to generate about $2.5 billion in annually recurring revenue.

Republican State Sen. John Rafferty, chairman of the Senate Transportation Committee, echoed the need for additional revenue. "We need to address our infrastructure," he said. "That's what drives economic development ... transportation."
His Democratic counterpart on the Senate Transportation Committee, state Sen. John Wozniak, echoed those sentiments. "Transportation infrastructure is economically vital to the state," he said. "Our crumbling roads and bridges must be addressed to protect the safety of all motorists. Plus, transportation projects are a powerful tool to get people back to work."

Other states are also struggling with how to cover and keep up with burgeoning infrastructure costs. Officials in Virginia see it as a top priority to figure out a long-term fix to the state's transportation funding challenges but so far, no luck. Because of declining revenue from the 17.5 cents-per-gallon state tax -- caused by a combination of inflation and more fuel-efficient cars -- the state's transportation trust fund could be depleted within about five years. Some legislators there favor increasing the gas tax (which was set in the mid-1980s) or at least indexing it to inflation. However, just as in Congress, the vast majority of Virginia policymakers lack the political will to do what is necessary.

[UPDATE: Virginia Delegate Scott Surovell (D) just proposed raising the state's gas tax -- a move that hasn't been made in 26 years -- in an effort to raise revenues and plug the $1 billion plus budget shortfall. "Cars are getting more efficient, and we're not collecting as much gas taxes anymore. We need to look at those kinds of options," Surovell says. He admits there is not much confidence in the legislature making progress on the tax from, gas or otherwise.]

In Maryland it's the same story with possibly a different ending. Gov. O'Malley is calling on legislators to show courage by passing his proposed 15 cents-per-gallon gas tax increase. This issue is expected to dominate the upcoming legislative session.

And it looks like there is going to be a gas tax debate in Iowa this year too. Gov. Terry Brandstad's Transportation 2020 Citizen Advisory Commission recommended a gas tax hike. Now, several lawmakers are eyeing legislative action to enact a 10-cent per gallon phased-in increase as a way to raise revenue to address Iowa’s aging and deteriorating roads and bridges. The goal is to generate between $184 million to $320 million in new yearly revenue for critical transportation needs. According to the Department of Transportation, roughly $215 million is needed to address Iowa’s “critical” infrastructure needs and more than $1 billion would be needed to cover all the outstanding transportation projects. DOT officials project that each penny increase in the state fuel tax would bring in about $22 million in revenue.

Apparently there was support for a gas tax hike a few years ago, but legislators gave up when then-Gov. Chet Culver threatened to veto any increase. Gov. Branstad has not threatened a veto yet and, according to media speculation, lawmakers don’t expect the governor to push for the tax increase but if it lands on his desk he will sign it.

According to the Institute on Taxation and Economic Policy, in its new report Building a Better Gas Tax, state gas tax revenues are not high enough to avoid being eaten away by inflation. After considering construction cost inflation, the average state’s gas tax is 6.8 cents lower today than the last time it was raised. If every state updated its gas tax rate to offset this decline, state revenues would be over $10 billion higher per year. Hence, the solution: Raise state gas taxes immediately to appropriate levels, index them to rising costs and inflation and offer tax credits to low-income families to avoid the regressive nature of gas taxes.  

With a little courage and a lot of common sense, elected leaders in all 50 states can make a dent in declining transportation revenues by accepting that in the absence of federal action raising state gas taxes is a tough but necessary step to address their infrastructure funding challenge.