With revenue falling, is it time to tweak gas taxes?
A great tax debate is breaking out in state capitals from Vermont to Texas: How do we maintain and expand our vital-but-aging networks of roads, bridges and urban transit systems?
For nearly a century, the nation has funded projects primarily with revenue from gasoline taxes. But the gasoline tax has lost value over the past decade. Changes in fuel-saving automotive technology and driving habits are resulting in less revenue to repair crumbling bridges, repave highways or upgrade buses and trains.
During the same time, many states have been loath to raise the tax. Sixteen states haven't raised gasoline taxes in 20 years or more, according to the Institute on Taxation and Economic Policy, a policy think tank.
So year after year, states have seen money for transportation slow to a trickle while critical transportation projects languished on engineers' drawing boards, the inventory of dilapidated and dangerous bridges swelled, and trains and buses got older and creakier.
The debate now is over whether the gas tax can be made sustainable with some fixes, whether other forms of taxation will pay for roads, or whether fees -- such as highway tolls and per-mile-traveled charges -- can fund transportation networks.
Virginia may dump gas tax
Nowhere is the debate more watched than in Virginia, where Gov. Bob McDonnell seeks to radically reform state transportation funding by repealing his state's 17.5-cents-a-gallon gas tax and replacing it with a transportation-targeted increase in the state sales tax.
McDonnell's press secretary, Jeff Caldwell, says the governor's "very novel approach" reflects his understanding that gasoline tax revenue will only continue to decline.
There are reasons for that. Since 2001, the number of miles driven per person has declined for every age group. People don't start driving until a later age. Many are turning to public transit, bicycling or walking. Since 2000, the number of bicycle commuters has increased 40% nationally, according to the National Conference of State Legislatures (NCSL).
And, Caldwell says, "If you raise the gas tax, it will inherently drive up the price of gas without addressing long-term the issue of declining (gas tax) revenue."
McDonnell's proposal, which would have to be approved by his state's legislature, is drawing fire from many quarters.
"He's just substituting one tax for another," says Joshua Schank, president of the Eno Center for Transportation, a non-partisan think tank based in Washington, D.C.
"It's a very bad move because it discards the 'user pays' funding concept that we've had ever since the gas tax was first collected by Oregon in 1919," says Bob Poole, director of transportation policy at the Reason Foundation, a libertarian policy research group.
"It's fundamentally bad tax policy," says Carl Davis, senior analyst at the liberal-leaning Institute on Taxation and Economic Policy. "With the gas tax, if you drive more, you pay more in taxes. Or, if you drive a heavier vehicle that does more damage to the roads, you pay more. If you get rid of the gas tax entirely and rely on the sales tax, you are very literally giving drivers a free ride."
Virginia's proposal is "by and large unprecedented," says Jaime Rall, a transportation analyst at the NCSL. The nearest example she could think of was a Hawaii state Senate bill last year that would have increased the vehicle weight tax and repealed the state fuel tax. The measure failed.
How gas taxes could change
Davis recommends linking, or indexing, state gasoline taxes to the rate of growth in the costs of concrete, steel and other infrastructure components. No state currently does, although Florida's gasoline tax rate is linked to the inflation rate measured by the consumer price index. Thirteen states link their gas tax rate to the price of gasoline, he says.
Among the funding options being debated in at least 13 states:
Other taxes and fees. Higher sales taxes, new taxes on gasoline stations, higher motor vehicle registration fees and more tolls are among the options being considered in Virginia, Pennsylvania, Massachusetts and Michigan.
In Texas, where the 20-cents-a-gallon gas tax hasn't been raised in 21 years, a state House committee reported in December that the state would have no money for new projects at the current funding level. The Legislature is considering a bill that would rededicate all motor vehicle taxes for transportation. Currently, the money also goes to education and other non-infrastructure expenditures.
Raising the gasoline tax. Wyoming appears to be the closest to raising the gasoline tax this year. A proposal to boost it for the first time in 14 years -- from 14 cents a gallon to 24 cents -- passed in the House and is being debated in the Senate. Minnesota lawmakers are mulling a new report from Democratic Gov. Mark Dayton's transportation advisory committee, which recommends higher gasoline taxes and vehicle registration fees. Higher taxes at the pump are also being considered in Massachusetts and Missouri.
But debating raising the tax is far more common than actually raising it. Since 2008, only a handful of states -- including Hawaii, Indiana, Minnesota, Oregon, Rhode Island and Vermont -- and the District of Columbia have raised it, Rall says.
Schank and Davis say that raising gas taxes is politically difficult because politicians have done a poor job of explaining to voters the connection between the taxes they pay at the pump and better roads, less congestion and safer rides.
"People don't like the gas tax when they talk about it in isolation, but they really don't like bad roads," Davis says.
Republican lawmakers in Wisconsin already are rejecting an advisory committee's early recommendations to raise the tax and imposing a mileage-based, vehicle-registration fee.
The federal gas tax has not been raised in two decades, but Congress has supplemented declining revenue by borrowing from the general fund for transportation -- an option not available to most states, which have balanced budget requirements.
Tax by miles traveled. Oregon, Washington and Vermont are among states considering replacing or supplementing the gasoline tax with one that taxes vehicles by the miles they travel. Oregon has legislation that would impose such a tax on 2015 or later-model-year cars that get at least 55 miles per gallon. New federal fuel-efficiency standards passed last year require that by 2025, cars average 54.5 miles per gallon, nearly double the current average.
In Washington, where gasoline tax revenue has been projected to drop by more than $5 billion total between 2007 and 2023, a legislative commission wants to study how such a tax would work.
At least 18 states have studied the idea, Rall says. But no state has moved beyond the experimentation phase and passed miles-traveled taxes on all vehicles, she says.
One problem is privacy concerns, because for the tax to work, cars would have to be equipped with GPS tracking devices that tally the miles driven.
Poole, the Libertarian, favors charging motorists for miles driven. "This is a true user fee, like tolls," he says.
He argues that privacy concerns could be eased by converting existing E-Z Pass transponders, currently used in about half the states, to mileage trackers. "That way," he says, "people don't need any Big Brother technology in their cars."