The Tax Hike Even Republicans Are Embracing
WHY YOU SHOULD CARE
Geriatric bridges and roads serve no one.
There aren’t too many people in Otoe County, Nebraska. But there are a lot of bridges — more than 300. (Who knew there was even water in Nebraska?) And in this rural county on the border of Iowa, all those bridges are a critical component of the routes that farmers use to transport their goods to market. Many of those bridges, however, are falling apart, endangering lives and livelihoods in a state that thrives on agriculture. Just repairing them, never mind rebuilding, will cost nearly $1 billion.
Which brings us to Sen. Jim Smith. The balding, avuncular co-owner of family business Norm’s Door Service is Republican — a dyed-in-the-wool fiscal conservative. In the past, the senator has introduced bills like the one eliminating fees on disabled veteran license plates, and another on gas pipelines. About the leftiest thing the man seems to have done ever involved a bill on electric bicycles (socialist!). But these days a tricky combination of factors is leaving this politician on the opposing side of his own team. And indeed, it’s like a vampire ordering garlic bread with his glass of red. Republican Sen. Jim Smith is raising taxes.
It’s an unexpected side effect of the shifting landscape of energy today. Thanks to a host of reasons, from hybrid cars to domestic energy discoveries, Americans are finally driving more efficiently and paying less at the pumps. But whether you are conservative or liberal, you know those bridges and roads we use break down a ton, and cost money to fix, which puts a man like Smith in a bind — encouraging higher taxes. Gas taxes have long been the main way American states funded road and infrastructure repairs, and the traditional cents-on-the-gallon fee no longer comes within miles of footing the bill.
Nebraska isn’t the only red state looking to increase its gas tax this year. Arkansas, South Dakota and South Carolina are others. Iowa already passed a 10-cent increase that kicked in March 1. And one state can start a wave. For example, Virginia reformed its gas tax in 2013, making it easier for neighbors like Maryland and Pennsylvania to follow, says Carl Davis, senior policy analyst at the Institute on Taxation and Economic Policy. “States notice what other states are doing.” Iowa’s new law will help Smith’s case next door, he says. It also helps that the business community is strongly behind these state laws, as they are at a national level. And approaches like phasing in or indexing the tax are more politically palatable for the general public, easing the pain of one big hike.
Still, we are talking about Republicans finding themselves wearing Democratic hats, at least in part. “Twenty-two years ago our gas tax was only 1 cent less what it is today,” says Smith. That means that the income flowing to states’ coffers for road repairs hasn’t kept up with the cost of fixing them. It’s certainly evident in places like Otoe County, where at any given time 25 to 30 bridges are closed, deemed too decrepit to drive over, according to a December report commissioned by the state legislature. “We are a farm-to-market state,” says Smith, who is chairman of the Nebraska legislature’s Transportation and Communications Committee. When roads and bridges are closed, it means farmers lose money.
States are realizing … they have to look within. We have to bite the bullet.
—Republican Sen. Jim Smith, Nebraska
Johnny Anderson, a Republican legislator from Utah, was bracing for a backlash in his suburban Salt Lake County district over his support for raising the Beehive State’s gas tax, indexed to gas prices. At town hall meetings he’s held, people would come in “with that kind of gruff attitude, ‘you better not raise my taxes.’” But they’d “walk out saying, ‘Oh, my gosh, we have to do this.’” Utah’s facing an $11.3 billion unmet funding need for infrastructure repairs, according to Anderson’s Transportation Committee. The legislature passed Anderson’s bill with broad Democratic support just before adjourning at midnight on March 13.
To be sure, the states aren’t going to get any help from Uncle Sam. Like Nebraska, Congress hasn’t raised the federal gas tax in more than two decades — it’s been stuck at the same 18.4-cents-per-gallon rate since 1993. Even now, with gas prices low and national highway funds dwindling, Republican leaders in Congress refuse to touch the tax. But the federal government, Americans know well, can run deficits to pay for necessities, a luxury states don’t have. So they need to raise money for repairs somehow. “States are realizing … they have to look within,” says Smith. “We have to bite the bullet.”
Of course, not everyone is on board. Liberal Massachusetts, of all places, voted to repeal its 2013 law indexing its gas tax to inflation in November. And legislators in Maryland, Virginia and West Virginia likewise have proposed bills to repeal their indexed taxes (Virginia’s bill has already been voted down). Even in Nebraska, one of Smith’s usual allies, the anti-tax group Americans for Prosperity, has come out against his gas tax proposal.
By the end of this legislative session, the majority of states in the country could well have raised their gas taxes, and made them more sustainable going forward. But that doesn’t mean the fight to fund infrastructure is over. While it may seem far off now, Americans are filling up their tanks less and less, a trend that’s bound to accelerate. That’s a problem if your income is tied to fueling. Given new, less gas-reliant automotive technology, “any plan that we put in place is going to be a near-term plan,” says Smith. In the future, “we’re going to have to look at user fees.”
According to research from the National Conference of State Legislatures, more than a dozen states have in fact launched pilot projects to test out ways to charge mileage-based fees. The largest yet will begin in Oregon in July, with the owners of 5,000 vehicles volunteering to pay a per-mile fee of 1.5 cents and get a refund on their state gas taxes in exchange. Questions remain about the most effective technology to track miles — GPS? Odometers? Some sort of on-board device? Privacy concerns are also part of the debate. Nearly half of all states also have begun taxing alternative car fuels like natural gas and electricity, and sending the revenue to transportation. The ideas are out there. As with anything, it’s the politics that will be the challenge.