States Pick Up Fuel Tax Debate

Any increase in the federal fuel tax is dead on arrival in Washington, but the idea of raising fuel taxes to pay for highways is alive and kicking beyond the Beltway.

In Arkansas, a state legislator is promoting a plan to raise funds for a $1.1 billion highway bond program through a 5 cent increase in the state’s diesel tax.

In Iowa, a state Senate transportation subcommittee approved a bill that would raise the state fuel tax 5 cents a gallon in 2013 and another 5 cents in 2014.

In Maryland, Gov. Martin O’Malley wants to apply the state’s 6 percent sales to gasoline purchases, a move that could add 18 cents to the pump price.

In Michigan, legislation is in play that would create a 28.3 cent per gallon tax on wholesale diesel and gas and adjust the tax each quarter based on the price of fuel.

In Vermont, a temporary increase in the gas tax, though not the diesel levy, is being mulled to help pay for the road and bridge damagecaused by Hurricane Irene.

All these plans reflect the fact that states are facing enormous shortfalls in infrastructure funding, and it’s getting harder to fill the potholes in state budgets.

The states also expect shortfalls in federal funding to worsen as the battle over federal transportation spending drags on and budgets become more austere.

As gas tax revenues drop, states such as Michigan are having trouble qualifying for federal funds, as Tom Greenwood points out in this blog from The Detroit News.

The push for higher fuel taxes is a bit more bipartisan beyond the Beltway, with support from Democrats and some, though far from all, Republicans.

In Michigan, the fuel tax hike is being pushed by Republican Gov. Rick Snyder. Snyder’s plan would eliminate the state’s retail tax on fuel — last changed in 1997 — shift the levy to fuel wholesalers and increase it by 9.3 cents per gallon.

Michigan would still charge a 6 cents per gallon sales tax at the pump, but wouldn’t have a retail fuel tax. The state would also increase vehicle registration fees.

The wholesale fuel tax would be variable and tied to the cost of fuel, but limited so it couldn’t go up or down too far. The overall goal is to raise $1.4 billion.

But state fuel tax proposals must travel a rocky road. In Iowa, Senate majority leader Democrat Mike Gronstal gave a gas tax hike a “50-50” chance in this session.

Gronstal told the Quad City Times the gas tax hike must get bipartisan support as the backing of Gov. Terry Branstad, who wants more savings from state programs.

In Arkansas, the proposed 5-cent diesel tax hike would be coupled with the repeal of a state sales tax break for heavy trucks and trailers approved last year.

The Arkansas bill was introduced by Democratic Rep. Larry Cowling, who can’t be accused of trying to levy a tax on someone else that he wouldn’t have to pay.

He owns Cowling Trucking, an interstate carrier based in Foreman, Ark., that operates 15 trucks, according to Federal Motor Carrier Safety Administration data.

Contact William B. Cassidy at wcassidy@joc.com. Follow him on Twitter at @wbcassidy_joc
 

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