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45 Cents a Gallon? 20? 18? Midwest Governors Float Major Gas Tax Hikes

Three governors -- two Democrats and a Republican -- say the big tax hikes are needed to address their road and transportation problems.

Mike DeWine gas tax hike
Ohio Republican Gov. Mike DeWine is proposing an 18-cents-per-gallon tax increase to help address what he calls "a deep hole" in transportation funding in his state.
(AP/John Minchillo)
March 4, 4:14 p.m. Update:

Michigan Gov. Gretchen Whitmer is expected to call for a 45-cent-per-gallon hike in the state's gas tax in order to pay for a $2 billion road rebuilding campaign. Those tax increases come on top of Michigan's 26.3-cent fuel tax. 

The governor's plan would gradually increase the gas tax in three 15-cent steps through October 2020, according to the Detroit Free Press. The governor is scheduled to formally announce the plan on Tuesday, March 5. 

Whitmer, a Democrat who took office in January, campaigned on the popular promise to "fix the damn roads," but she had not specified until now how she would pay for that effort. Her plan faces an uncertain future in the Republican-controlled legislature, which was skittish about raising fuel taxes even during the tenure of Whitmer's Republican predecessor.

The Michigan governor's bold proposal follows the actions of other governors in the Midwest who have also called for big hikes in state fuel taxes. Ohio Gov. Mike DeWine, a Republican, is asking for an 18-cent increase in the per-gallon rate, while Minnesota Gov. Tim Walz, a Democrat, proposed a 20-cent hike. Wisconsin Gov. Tony Evers, also a Democrat, is calling for an 8-cent-per-gallon increase.  

Original Story:

The prospect of raising gas taxes often makes politicians skittish, whether at the state or federal level. But two Midwestern governors -- one Democrat and one Republican -- are showing no such qualms. They’re not only calling for gas tax hikes, they’re calling for those hikes to be big.

Ohio Gov. Mike DeWine, a Republican, is leading the charge to raise his state’s gas tax by 18 cents a gallon. That’s on top of the 28 cents a gallon Ohio currently charges motorists, and it’s roughly equivalent to the 18.4 cents the federal government has charged on every gallon of gasoline since 1993.

Minnesota Gov. Tim Walz, a Democrat, is going even further, with a call for a 20-cent hike of the state’s gasoline tax. That’s more than Walz had suggested in his gubernatorial campaign, when he advocated for a 10-cents-a-gallon increase. Minnesota’s gas tax now stands at 28.6 cents per gallon.

Both governors said they landed on the big numbers after reviewing their states’ infrastructure needs and available financing. “We’re in a deep hole,” DeWine, Ohio’s governor, told Governing while in Washington this weekend. “Anything less than that, and our roads are going to start to go downhill.”

Ohio’s transportation troubles are coming fast. DeWine’s predecessor, Gov. John Kasich, patched up the state’s transportation funding system in late 2012 by issuing bonds backed by toll road revenue. But all that revenue is close to running dry; the state won’t be able to use it for new projects in the coming years.

“We start every year by having to pay $390 million for debt service that’s doing us no good now,” DeWine said. “The money that was brought in and passed last bond issue masked the structural deficit we have. That bond money is gone or almost gone.”

The crisis comes on top of the long-standing issues surrounding motor fuel taxes in the state in general. In Ohio, the revenue generated by those taxes is coming in flat, because vehicles are becoming more fuel-efficient. Meanwhile, inflation is eating away at the buying power of the money raised by existing gas taxes. Ohio last raised its gas taxes 13 years ago and has lost its purchasing power since, because the gas tax rate does not vary with the cost of fuel.

Both DeWine and Walz want to index their states’ gas taxes to the rate of inflation.

DeWine commissioned a group of experts to look at his state’s transportation funding woes, and the group issued an 89-page report earlier this month that examined many options for raising new revenues. But ultimately, the group concluded that a higher fuel gas tax was “the only funding mechanism that generated broad consensus.”

In Minnesota, Walz said the state’s unusually large network of roads is one factor that contributes to the state’s transportation upkeep costs. Walz relied on estimates from civil engineers and the state Transportation Department to determine how much money the state would need over the next 20 years to maintain its current systems and adjust for population growth. They estimated it would take $19 billion.

“The number was not an arbitrary number,” Walz said. “We based it solely on what the need was.”

While the increase may seem high, the governor says, most people he talks with about the gas tax don’t know how much they’re paying today. One of his constituents told Walz that Minnesota officials raised the gas tax every year, when, in fact, they haven’t touched it since 2008, and that increase came when lawmakers were under immense scrutiny because 13 people had died when an interstate bridge collapsed in Minneapolis the year before.

(Walz’s predecessor, Gov. Mark Dayton, tried to raise the gas tax four years ago but couldn’t get lawmakers to go along with the idea.)

Part of the problem, Walz said, is the price of gas goes up and down so often. “I tell them this when they say, ‘Tim is going to raise the gas tax:’ Since I’ve been elected, gas has gone down 79 cents,” Walz said. “I’m not taking credit for that, but fluctuation in gas prices happens all the time.”

Of course, neither the Minnesota nor the Ohio proposals have been passed into law, and it’s not clear either will survive in this year’s legislative sessions.

Walz said he has tried to attract support for the idea by including projects such as bike trails and transit in his plan. He has also proposed a tax break for low-income families, to “take the sting out of the gas tax.” Those measures may help Walz build a coalition for the gas tax hike in the House, where Democrats hold a majority. But it’s unclear whether they will convince the Republicans who control the state Senate to sign on.

Republicans control both chambers of the Ohio Legislature, and they’ve made tax relief a major priority in recent years. But legislative leaders seemed at least open to a gas tax hike when DeWine proposed it.

Both DeWine and Walz came to Washington last weekend to meet with other governors as well as  President Trump and other members of the administration, as part of the National Governors Association winter meeting.

Vice President Mike Pence told a group of governors that the administration still plans on passing a major infrastructure deal this year. “I’ll make you a promise -- and we'll ask for your help -- that, in this Congress, we're going to pass historic infrastructure legislation that will rebuild the roads and bridges and infrastructure of America,” he said, according to his office.

Any influx of federal money would clearly help states like Minnesota and Ohio deal with their infrastructure upkeep problems. But getting a big transportation package through Congress quickly would be difficult. So the governors seem more focused on taking care of their concerns at the state level, instead.

“Minnesotans know they get what they pay for,” Walz said. “They’re willing to pay taxes if they know where it’s going and they think it’s fair.”

This appears in the Infrastructure newsletter. Subscribe for free.

Dan is Governing’s transportation and infrastructure reporter.
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