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Analysis: Most states say no to gasoline tax hikes
March 8, 2011 / 5:43 PM / 7 years ago

Analysis: Most states say no to gasoline tax hikes

WASHINGTON (Reuters) - An anti-tax chill has states scrambling to find billions for road and bridge repair, but few are willing to consider politically treacherous gasoline tax hikes to close widening funding shortfalls.

<p>A man poses with a gasoline pump at a Budapest petrol station January 19, 2011. Gasoline prices just hit a new record high in the central European country. REUTERS/Bernadett Szabo</p>

High unemployment, soaring pump prices due to recent Middle East tumult and potentially steep political consequences have most governors and legislatures, the Obama administration and Republicans in Congress dousing any notions of higher gas taxes.

Nonpartisan transportation and fiscal policy groups, however, recommend increases now for infrastructure spending.

“The alternative is to significantly retrench on transportation,” said Ben Barnes, a finance expert who is Connecticut’s state secretary of policy and management.

The gap between revenues and capital needs each year for transportation projects is $137 billion, congressional figures show. State gas taxes average about 25 cents per gallon and are added at the pump to the 18.4 cent federal levy.

Despite the need to repair bridges and other transportation infrastructure, backing a tax increase that hits so many voters carries a political price for lawmakers and governors.

Nowhere is this more apparent than in Minnesota.

A bridge collapse in Minneapolis in 2007 that killed 13 people spurred an 8.5 cent gas tax hike through 2012. But two of six Republicans who cast decisive votes to override Governor Tim Pawlenty’s veto of the measure, which included other taxes, lost their seats.

“You had a big blow-back that lasts to today,” Steven Schier, a political analyst at Carleton College in Northfield, Minnesota, said of the vote that helped create an anti-tax climate. “That has not been lost on those running for reelection.”

Connecticut is pursuing a gas tax increase this year, even with pump prices topping a national average of $3.50 a gallon. Maryland is also weighing one. Several states automatically adjust their gas taxes periodically based on economic conditions. The Utah Senate on Monday rejected a plan to raise its levy by 5 cents.

No state approved increases last year when gas was 75 cents cheaper. Vermont, Hawaii, Oregon and Rhode Island did in 2009.

Although states received $48 billion in U.S. economic stimulus money for transportation, that windfall is gone. States face tight budgets and a backlog of projects they would like to begin in order to create jobs.

“States are responsible for coming up with a lot of money and many have enormous transportation funding shortfalls,” said Richard Watts, a researcher at the University of Vermont’s center on transportation, community development and economics.

“Gas taxes have become a liability for politicians beyond the actual impact on voters’ pocketbooks,” he said.

In Connecticut, Governor Daniel Malloy has proposed a 3 cent gas tax hike to 28 cents to raise $45 million annually as part of a larger revenue plan that complements spending cuts.

Barnes said the legislative push will be challenging even though he noted Connecticut’s transportation fund -- supported mainly by gas tax receipts -- is running out of money. Bonds are issued against that fund.

States pay 20 percent of big-ticket road projects while the federal government pays 80 percent.

As in the states, federal gas tax receipts have dropped steadily as motorists opted for more efficient vehicles and drove less during the economic downturn. And states are now looking to Washington for leadership on immediate financing.

Investors, including private funds and pension plans, also want clarity on related priorities.

The Obama administration wants to spend $556 billion over six years to upgrade roads and bridges and transit systems but has provided few details on financing. But U.S. Transportation Secretary Ray LaHood says a federal gas tax hike for the first time in 18 years is off the table due to high unemployment.

And Mary Peters, LaHood’s immediate predecessor now a consultant for infrastructure investors, favors a motorist user fee rather consumption taxes “to get us over the hump.” She told Reuters in an interview the federal government could also remove restrictions on interstate tolling to get more “private dollars to the table.”

Although experts say many in government privately believe gas taxes can be a bridge to private investment and other financing options, raising taxes will be politically difficult, especially with prices steadily going up.

“I don’t think there is a whole lot of wiggle room,” said Sean Slone, transportation analyst with the Council of State Governments.

Additional reporting by Lisa Lambert; Editing by Kenneth Barry

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