NCPA - National Center for Policy Analysis

New Tax Hikes Eyed for Roads, Transit

January 29, 2013

States are scrambling to find taxes to pay for highway repairs and their public transit systems, including payroll and sales taxes, and raising taxes paid by gasoline stations, says USA Today.

The proposals, being kicked around in at least 13 states as governors lay out their legislative agendas for the year, come as states find revenue from stagnant federal and state gasoline taxes isn't keeping up with highways, bridges and urban transit systems that increasingly are falling into disrepair.

Among them:

  • Massachusetts Gov. Deval Patrick, a Democrat, is considering several options to raise about $1 billion a year, including raising the state's 21-cents-a-gallon gasoline tax, raising the sales tax, increasing the income tax or imposing a tax based on the miles a vehicle travels.
  • Virginia Gov. Bob McDonnell, a Republican, wants to scrap the 17.5-cents-a-gallon state gasoline tax and increase the state's 5 percent sales tax to 5.8 percent, with the additional money going to transportation. If passed by the legislature, Virginia would become the only state without a gas tax paid at the pump.
  • Pennsylvania Gov. Tom Corbett, a Republican, wants to remove a cap on the oil company franchise tax paid by gas stations to raise an estimated $1.9 billion a year.

Funding transportation has reached a point of national crisis, says the American Society of Engineers, which estimates the country needs to spend $2.7 trillion on total infrastructure between now and 2020, but is falling more than $1 trillion short of that.

A big reason for the hustle for new taxes: Federal and state gasoline taxes, the primary way of funding transportation, aren't keeping up with demands as automobiles become more fuel-efficient, people drive less, and electric and hybrid vehicles increase in number.

Compounding the situation: The federal gasoline tax, which goes back to the states to pay for transportation, has been set at 18.4 cents a gallon for two decades. Some states haven't raised gasoline taxes in a quarter-century. During the same time, construction costs have soared. That has diminished the purchasing power of the federal gasoline tax by 33 percent since 1993 when it was last raised. On average, the value of state gasoline taxes has effectively fallen 20 percent because of inflation for a nationwide total of $10 billion a year.

Source: Larry Copeland, "New Tax Hikes Eyed for Roads, Transit," USA Today, January 25, 2013.


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