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Research & Commentary: Gas Taxes Can’t Fuel Louisiana Transportation Projects

May 2, 2019

In this Research & Commentary, Matthew Glans discusses proposed legislation in Louisiana that would gradually increase the state’s gasoline tax from 38.4 cents-per-gallon to 56.4 cents-per-gallon by 2031.

Over the past decade, 30 states have either increased or reformed their gas taxes. In Louisiana, lawmakers are considering House Bill 542, which would gradually increase the state’s gasoline tax from 38.4 cents-per-gallon to 56.4 cents-per-gallon by 2031. The goal is to cover the Pelican State’s $14 billion transportation funding backlog. Wisely, Louisiana has not increased its gas tax in more than 30 years. This has resulted in the state having one of the lowest and most competitive in the South and across the entire United States. The initial increase would raise the gasoline tax by 6 cents in 2019 and the state diesel tax by 4 cents in 2019.

In addition to the fuel tax increase, the tax hike proposal includes two new “fees,” better described as “taxes,” on both electric and hybrid vehicles, and vehicle titles. Under the legislation, a new $300 fee would be established on electric vehicles along with a $200 fee on hybrids. Although this is a clear attempt to address the effect of these vehicles on lowering gas tax revenues, it represents only a small portion of the vehicles on the state’s road and will not solve the funding shortfall in the long term.

In a Maryland Public Policy Institute study, Wendell Cox and Ronald Utt argue gas taxes have a significantly greater detrimental effect on lower- and middle-income families than they do on the wealthy, and Americans for Prosperity estimates lower gas prices amount to approximately $100 in additional spendable income per month for an average family.

One reform that Louisiana lawmakers ought to consider is limiting the use of gas tax dollars to fund transportation projects. Wasteful spending is an issue that has long plagued transportation funding. H.B. 542 attempts to address this problem by moving some, but not all of the new and existing tax dollars to the Construction Subfund of the Transportation Trust Fund, a quasi “lockbox.” In essence, these funds could not be used for the Department of Transportation and Development’s salaries and benefits.

The bill would also dedicate 40 percent of the new revenue to major projects with the remaining 60 percent going toward infrastructure preservation. Although these efforts are a good first step, further efforts need to be made to ensure all funds raised for transportation projects are only used to improve Louisiana’s infrastructure.

It is not appropriate to add the burden of additional tax or fee increases on households that are already struggling to make ends meet. Even worse, a gas tax hike would raise prices on goods and services throughout the economy, not just on gasoline because virtually all consumer goods are transported using gasoline-powered transportation. In fact, nearly 70 percent of all freight transported annually in the United States, accounting for manufactured and retail goods worth $671 billion, is transported by truck, according to Truckinfo.net. Businesses will simply pass the added costs on to consumers.

Louisiana lawmakers should take all of this into consideration before they vote for yet another tax-and-spend scheme.

The following documents provide additional information about how motor-fuel taxes are applied and the impact they have on states’ economies.
 

State Motor Fuel Taxes
https://www.api.org/oil-and-natural-gas/consumer-information/motor-fuel-taxes/gasoline-tax
The American Petroleum Institute documents each state’s current motor-fuel taxes (both gasoline and diesel).

23rd Annual Highway Report on the Performance of State Highway Systems
https://reason.org/wp-content/uploads/2018/01/23rd_annual_highway_report.pdf
In this report, the Reason Foundation ranks the performance of state highway systems in 11 categories, including spending per mile, pavement conditions, deficient bridges, traffic congestion, and fatality rates.

Top Five Reasons Not to Raise the Gas Tax
https://www.atr.org/top-five-reasons-not-raise-gas-tax
In this article, Emma Boone of Americans for Tax Reform outlines five reasons not to raise gasoline taxes.

Gas Taxes Not Long-Term Answer For Infrastructure Funding
https://www.forbes.com/sites/adammillsap/2019/04/29/gas-taxes-not-long-term-answer-for-infrastructure-funding/#697cfa692ae8
In this Forbes article, Adam Millsap of Florida State University argues that while pressing infrastructure needs do exist many states, the gas tax is not the long-term funding answer. Millsap examines several alternatives to gas taxes that are not impacted by electric vehicles and that are more connected to road use.

 

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit the Budget & Tax News website, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.

The Heartland Institute can send an expert to your state to testify or brief your caucus; host an event in your state, or send you further information on a topic. Please don’t hesitate to contact us if we can be of assistance! If you have any questions or comments, contact George Jamerson, Heartland’s director of government relations, at gjamerson@heartland.org or 312/377-4000.

Author
Matthew Glans joined the staff of The Heartland Institute in November 2007 as legislative specialist for insurance and finance. In 2012, Glans was named senior policy analyst.
mglans@heartland.org @HeartlandGR