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States push to raise gasoline taxes 2/21/2017

2/21/2017, Wall Street Journal – Tennessee and Alaska are among the states looking to tax motorists more after decades with no increase

Tennessee Gov. Bill Haslam is putting his fellow Republican lawmakers to the test, with a plan to raise the state’s gas taxes for the first time in nearly three decades.

He joins a string of governors who have pushed through similar increases. “We need to do something,” Mr. Haslam said in a recent interview, asserting that a gas tax is the most equitable revenue stream to use to fix roads. He said his plan would raise about $278 million a year for road and infrastructure improvements.

Nearly 20 states, with both Republican and Democratic governors, have raised gas taxes or recalculated gas-tax formulas in recent years to generate funds for upgrades to aging roads and bridges. This legislative season, at least a dozen more are considering such measures, said Kevin Pula, a transportation policy specialist at the National Conference of State Legislatures.

Pushing states to this point are, on one side, rising construction costs, and on the other lower tax receipts from declining pump sales, which are themselves the result of more fuel-efficient vehicles and a slow economic recovery. Washington hasn’t raised the federal gas tax since 1993, and the Republican party platform explicitly opposes any further increases to it.

Tennessee Gov. Bill Haslam announced his legislative agenda plan on Jan. 18 in Nashville. He is proposing to raise Tennessee’s tax on gasoline by 7 cents a gallon, while cutting the state’s sales tax on groceries.

Even with President Donald Trump’s pledge to invest as much as $1 trillion in national infrastructure, states are realizing they can’t rely on federal funding to repair overburdened roads and bridges.

“East, west, north, south, Republican, Democrat—states across the country are stepping up to the plate to deal with this issue,” Mr. Pula said.

In Alaska, Gov. Bill Walker, an independent, proposed tripling the state’s gas tax to 24 cents a gallon by 2018. The state has the lowest gas tax in the country and hasn’t raised it since 1970. In his recent state of the state address, Mr. Walker said he is trying to deal with a $3 billion fiscal gap, after state revenues collapsed by more than 80% from four years ago due in large part to the drop in oil and natural-gas prices.

New Jersey’s Republican Gov. Chris Christie raised the state’s gasoline tax last year by 23 cents a gallon, his first tax hike in two terms as governor, which he offset with some other tax reductions.

On Thursday, the Republican-dominated Indiana House voted 61 to 36 in favor of increasing the state gas tax from 18 cents a gallon to 28 cents with annual adjustment increases possible through 2024. The bill now goes to the state Senate.

A motorist preparing to pump fuel at a gas station in Guild, Tenn., in January 2017. Tennessee, a state of 6.5 million people, needs more than $10 billion over the next 10 to 12 years to fund road and bridge repairs. PHOTO: LUKE SHARRETT/BLOOMBERG NEWS

“The success of states to raise their gas taxes and the limited backlash have probably emboldened others,” said Jared Walczak, a policy analyst at Tax Foundation, a Washington, D.C.,-based, pro-business group that advocates for lower state and federal taxes.

Tennessee’s Gov. Haslam, who has cut state taxes multiple times since he took office in 2011, floated the idea of raising the gas tax before last year’s legislative session. It was met with so much criticism that he didn’t bring forth a bill.

This year, he submitted a plan that proposes to add seven cents to the state’s 21-cents-a-gallon tax for regular gas, and another 12 cents to the 18-cents-a-gallon diesel tax. He argued that Tennessee, a state of 6.5 million people, needs more than $10 billion over the next 10 to 12 years to fund road and bridge repairs. The current proposal allows the state to adjust the tax for inflation every two years.

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The plan mitigates the bite of the proposed tax hike with a reduction in the state sales tax on food and ingredients, as well as tax cuts for manufacturers, an attempt to lure more businesses to the state. The proposal would steer tens of millions of dollars to county and local governments for infrastructure, winning broad support from local leaders.

Mr. Haslam is in a position to understand the impact of such a tax hike. For years, the 58-year-old helped run his family’s Knoxville-based business, Pilot Corp., which operates Pilot Flying J, the nation’s biggest truck-stop chain with more than 750 outlets in North America. Mr. Haslam said it would have been easier to ignore the problem of unfixed roads, but “I decided it was important to do the right thing.”

Leaders in the state General Assembly, where both houses are controlled by Republican supermajorities, aren’t convinced that a higher gas tax is the way to go.

Republican state Rep. David Hawk, the House assistant majority leader, has a competing proposal that would channel a quarter of a percent of the existing state sales tax to transportation needs, rather than into the state’s general fund. Mr. Hawk estimates his plan would raise about $291 million annually for road and infrastructure improvements.

Mr. Hawk’s plan is gathering support, including from the Republican House majority leader, Glen Casada. “The only option that I see passing is David Hawk’s,” Mr. Casada said.

Michael Foster, city manager of Rocky Top, a small town in East Tennessee that gets more than 11,000 vehicles a day, said the additional funds for road repair will help the city keep property taxes down, while also gleaning revenue from out-of-state drivers.

“No one wants to see a gas tax, but you’ve got to get the money from somewhere,” Mr. Foster said.