At the state level, the usual response to recommendations that taxes be
increased to preserve vital state services has generally been: "Now is
not the time". The most notable exception to this trend so far has
been with the cigarette tax, as we've explained before.
Increasingly, however, policymakers appear to be coming around to the
idea of boosting gas tax rates in order to raise the revenue needed to
maintain our nation's infrastructure. Given that most state gas taxes
haven't been increased for quite a few years, and that during that time
inflation has significantly eroded the value of most gas tax rates, our
only response can be, "It's about time."
In Maryland, for example, the Senate President recently expressed an interest in raising the gas tax, urging
that "there's got to be an increase in the transportation trust fund
somewhere, and there's got to be a way we can find people with the
political will to make it happen". Numerous governors have echoed this
call as of late, most recently in Massachusetts, and Idaho.
Idaho, especially, the Governor was able to hit the nail on the head
with his observation that, "[we last raised] the fuel tax... 13 years
ago. And now here we are trying to accomplish 2009 goals with 1996
dollars. Everyone in this room or listening to me throughout Idaho
today -- everyone who has a household budget or runs a business --
knows that just doesn't work".
response to this problem, Idaho Governor "Butch" Otter has recommended
bumping the gas tax upward by 2 cents in each of the next 5 years.
Addressing the root of the problem even more directly, Wisconsin
Governor Jim Doyle has proposed
indexing the gas tax rate to inflation -- a practice that had existed
in Wisconsin up until 2006. Maine and Florida continue to index their
gas tax rates today, with very favorable results in terms of providing
each state with a somewhat more adequate and sustainable source of
the federal gas tax is not indexed to inflation, meaning that the
Federal Highway Trust Fund is suffering from many of the same problems
we see plaguing the states mentioned above. The federal gas tax has
not been increased in over 15 years. President Obama's new Energy
Secretary, Steven Chu, has previously gone on the record as supporting raising the gasoline tax. The views of Transportation Secretary Ray LaHood are not yet clear.
What is clear, however, is that something will have to be done at the
federal, as well as the state level, if gas tax revenues are to be
restored to their previous purchasing power.
Of course, the gas tax is not perfect. Aside from the long-term issues
arising out of improved fuel efficiency (which we need to begin
planning for now), the regressivity of the tax is very worrisome,
especially in these difficult times. Fortunately, low-income gas tax
credits, as we've advocated on multiple occasions, are very capable of remedying this shortcoming.