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The Leaflet: States Raise Fuel Taxes to Repair Roads

March 29, 2019

Crumbling infrastructure in many states have prompted legislators to propose higher fuel taxes to fund road repairs. Fuel tax hikes should always be paired with other tax cuts and spending cuts.

American infrastructure is in a dire state. In fact, the American Civil Society of Engineers graded the conditions of the nation’s roads and bridges as D and C+, respectively, in the most recent Infrastructure Report Card. As usual, states are blaming the crumbling infrastructure on lack of funds. Even more unsurprisingly, several states are proposing higher fuel taxes to solve the problem.

Recently, the governor of Michigan proposed a near tripling of the state’s gasoline tax from 26.3 to 71.3 cents per gallon by October 2020, which would make it the highest gas tax in the country.

Supporters estimate the hike would generate $2.5 billion annually in revenue for road, highway, and bridge repairs.

Ohio is considering tax hikes as well. Gov. Mike DeWine, in his $7 billion transportation budget, included an increase in the state’s gas tax from 28 cents to 46 cents per gallon, effective this July. If approved, Ohio would have the fifth highest gas tax in the nation—estimated to generate $1.2 billion annually.

Alabama called a special session specifically to address much-needed infrastructure funding. Earlier this month, Gov. Kay Ivey signed a bill into law that raises Alabama’s gasoline tax by 10 cents over three years, which is estimated to raise $320 million annually. The law also indexes the tax to national highway construction costs that could increase it by a penny every two years beginning in 2023.

Americans recognize the need to repair decaying infrastructure, according to polling. However, they don’t want to pay more taxes to fix it. Almost half of Alabamians say “no” to gas tax increases for road maintenance. In Ohio, 32 percent oppose gas tax hikes, and another 23 percent “strongly” oppose. In 2015, Michiganders overwhelmingly rejected a ballot initiative that would have increased the state’s gas tax to 41.7 cents.

To some degree, gasoline taxes are necessary. In fact, economists favor “user taxes and fees” because people who use the roads bear a sizable portion of the costs necessary to maintain them. However, state legislators should make it a point to explicitly earmark transportation revenue for transportation expenditures only. In 2011, road user fees and taxes funded only half of all state and local expenses on roads. Of course, any gas tax hike should be offset with other tax reductions and spending cuts.

Another point legislators should consider is that automobile manufacturers consistently improve mileage efficiency. This fact, coupled with the growing number of hybrid and electric vehicles, will reduce gasoline tax revenue. Thus, states should consider alternative sources for road funds, such as privatizing, electronic toll systems, congestion pricing, and eliminating prevailing wage laws. These options would reduce administrative bloat, limit traffic, and provide a stable, fair revenue source to ensure infrastructure is properly maintained.

 

What We’re Working On

Energy & Environment
Low-Carbon Fuel Standard Would Be Bad for Washingtonians
In this Research & Commentary, Policy Analyst Tim Benson writes about legislation that would establish a low-carbon fuel standard (LCFS) in Washington State no later than 2021. LCFS standards are designed to decrease the carbon-dioxide content of gasoline and diesel fuel to curb carbon dioxide emissions, mainly through the expanded use of biofuel mixtures in gasoline and diesel fuels. However, the LCFS would also work like a cap-and-trade program, allowing fuel suppliers to buy “credits” from suppliers of transportation fuels with low carbon-dioxide intensity, such as natural gas, electricity, and propane.

Education
Illinois’ Invest in Kids Program Should Be Expanded, Not Phased Out
In this Research & Commentary, Policy Analyst Tim Benson details Illinois Gov. J.B. Pritzker’s efforts to end the Invest in Kids Program, a tax-credit scholarship program for low- and middle-income children. Enacted in 2017, the Invest in Kids Program is open to families with household income levels below 300 percent of the federal poverty level. In its first year, more than 5,400 scholarships were awarded, with an average scholarship amount around $6,700. Pritzker’s plan would lower the program’s budget cap to $50 million in the current fiscal year and gradually phase the program out entirely over the next three fiscal years.

Health Care
South Carolina Should End Disruptive Certificate of Need Laws
In this Policy Tip Sheet, Senior Policy Analyst Matthew Glans outlines the negative effects of certificate of need (CON) laws and why South Carolina should repeal them. “Ideally, a full repeal of burdensome and unnecessary regulations such as CON laws should be applied across the board in South Carolina and in every other state, a move that would benefit all health care providers and their patients,” wrote Glans.

Budget & Tax
Floor Tax Would Vaporize Tobacco Harm Reduction Options in Nevada
In this Research & Commentary, Government Relations Manager Lindsey Stroud examines a Nevada bill that would apply a 30 percent excise tax on e-cigarettes and vaping products, as well as require retailers to pay a tax on existing inventory by July 1, 2019. “Rather than imposing a burdensome wholesale floor tax on e-cigarettes and vaping devices, which would essentially vaporize the industry, Nevada lawmakers should promote the use of tobacco harm reduction products. E-cigarettes have been successful tools in helping smokers quit, provide significant savings for the health care system and taxpayers, and deliver a shot in the arm to local and state economies,” wrote Stroud.

From Our Free-Market Friends
Tangled: A Commonsense Solution to Stop Blow-Dry Bar Overregulation
Tangled is a new report from the Goldwater Institute that discusses the unnecessary and burdensome licensure requirements stylists must meet before working at blow-dry bars. Blow-dry stylists are entrepreneurs responding to demand for affordable and convenient salon sessions. These stylists simply wash and style customers’ hair with everyday tools – no cutting, dyeing, or perming services offered. Every state, except Virginia, requires these stylists to obtain a cosmetology license, which involves at least 1,000 hours of training and passing a state board exam. Working without a license is a crime punishable by up to six months in jail and a $2,000 fine in Arizona, for example.


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Author
Arianna Wilkerson works in government relations at The Heartland Institute.
awilkerson@heartland.org