Raising Gas Taxes Gets Bipartisan Boost from Governors

Fueled by low gas prices and deteriorating roads, at least a dozen states -- Democrat and Republican -- are considering increasing gas taxes this year.
by | February 9, 2015

Increasing the gas tax may not happen anytime soon in Congress, but it is gaining traction in more than a dozen state capitols this year.

Many governors made finding new money for roads and other infrastructure a major priority in the early months of this year’s legislative sessions, even if that means increasing fuel taxes. Both Democrats and Republicans say spending more money on roads could spur local economies at a time when federal funds are sparse, gas is cheap, interest rates are low and re-election campaigns are a long way off.

Nationally, 20 percent of highway miles are in need of resurfacing or reconstruction, while nearly a quarter of bridges are structurally deficient, according to the Federal Highway Administration.

South Dakota Gov. Dennis Daugaard presented one of the most detailed plans for raising transportation funds. His plan would include hiking the state’s vehicle excise tax and increasing the motor fuel tax by 2 cents a gallon every year.

“No one wants to raise taxes less than I do,” the Republican governor said. But “there is a difference between being cheap and being frugal. A cheap person refuses to spend money even when it would be wise to do so. A frugal person is careful with money but understands that sometimes spending in the short run is smart and saves money in the long run.”

Other governors stressed the need for more money but did not specify where to get it. “I am not going to stand here and tell you how to swallow this elephant,” Idaho Gov. Butch Otter told lawmakers. “But we all know it must be done.”

Leadership from governors is important to getting legislators to find more transportation money, said Sean Slone, a transportation analyst for the Council of State Governments. Increasingly, he said, governors and legislative leaders are talking about raising the per-gallon taxes, despite the potential political trouble that would bring.

“Straight-up gas taxes are more in vogue this year than they have been in the last couple of years,” Slone said.

Carl Davis, a senior analyst at the Institute of Taxation and Economic Policy, a liberal group that focuses on tax fairness and sustainability, said as many as 12 states could pass gas tax increases this year. Those include Georgia, Idaho, Iowa, Michigan, Minnesota, Missouri, New Jersey, South Carolina, South Dakota, Tennessee, Utah and Washington.

Minnesota Gov. Mark Dayton, a Democrat, wants to add a 6.5 percent tax on wholesale purchases of gasoline. South Carolina Gov. Nikki Haley, a Republican, proposed raising gas taxes by 10 cents a gallon, but only if it were tied to an overall reduction in the state’s income tax. Iowa Gov. Terry Branstad has stressed the need for increased spending on infrastructure, as state lawmakers craft a funding bill that is expected to come with a 10-cent per gallon tax increase.

The fact that so many governors are promoting infrastructure projects is a good sign for efforts in those states, said CSG’s Slone. But governors can stymie those efforts as well.

New Jersey’s transportation trust fund could run out of money as soon as July, but Gov. Chris Christie has been reluctant to back a new gas tax to replenish the account, adding uncertainty to the fund's future.

Newly inaugurated Maryland Gov. Larry Hogan, a Republican, wants to repeal the automatic increases in the state gas tax signed by his Democratic predecessor.

“Marylanders deserve the transparency to know how their elected leaders vote every time the state takes a bigger share of their hard-earned dollars. This is a regressive tax that hurts struggling Maryland families and our most vulnerable, and which adds to the cost of almost everything,” Hogan said.

The repeal effort is a long shot in a legislature controlled by the same Democrats who passed the escalating tax two years ago. But the idea proved popular in Massachusetts, another state where Democrats dominate the legislature but where voters rolled back annual gas tax increases in last November’s election.

States are feeling the effects of other ballot measures from last fall. Connecticut Gov. Dannell Malloy, a Democrat, called for more transportation money, but only if that money is protected from being raided for other uses. The “lockbox” idea is similar to changes approved by voters in Maryland and Wisconsin last year.

Voters' rejection in August of a ballot measure to raise the sales tax to improve Missouri roads means the state won’t have enough money to match incoming federal funds by 2017, Missouri Gov. Jay Nixon, a Democrat, warned legislators. He urged them to consider adding tolls to Interstate 70 and increasing the gas tax. Both ideas have long been unpopular in the Republican-led legislature there.

Many state leaders are worried that federal funding is unreliable, too. Congress hasn’t raised the federal gas tax since 1993, and it’s been unable to cobble together a long-term transportation law since the last one expired in September 2009. The most recent extension only runs through May.

Many of the states looking at making their own spending increases have been discussing the issue for years. Special commissions have studied funding options in Georgia, Louisiana, South Dakota and Wisconsin.

ITEP’s Davis also credited falling gas prices for putting fuel tax increases on legislative agendas this year. “These discussions have been on the table for years,” he said. “The fact that gas prices have come down just makes it a little more politically palatable to deal with problems we’ve had for a long, long time now.”