States Raise Fuel Taxes to Repair Roads

By Arianna Wilkerson <AWilkerson@heartland.org>

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.

%d bloggers like this: