States are doing what Congress won't on the gas tax

Posted at 1:37 PM, Aug 18, 2015

Congress has been struggling for years to come up with a sustainable way to get much-needed transportation dollars to the states.

But as the country continues to grapple with infrastructure costs and maintenance, more than a dozen states have taken matters into their own hands, bumping up taxes on gasoline across the country — from Georgia to Washington, South Dakota to Maryland.

Since the mid-1950s, federal lawmakers have delivered money to the states via the Highway Trust Fund, which pays for roads, bridges, rail and other transportation-related projects.

But the Highway Trust fund is running out of money. The Department of Transportation estimates that the Fund will become insolvent by the end of the year. Why?

The problem rests in the trust fund’s source of revenue: a federal gas tax of 18.4 cents per gallon that has not been raised since 1993 and relies on drivers who are using less gasoline than they used to.

The ‘gas tax’ we so often hear about is actually a set of taxes – the fixed, federal tax of 18.4 cents plus additional state and local taxes. Over the last year, more than a dozen states have increased the local and state taxes they can control to build and repair roads, bridges and public transportation. It’s a move state lawmakers have been reluctant to implement, until now.

“We had quite a long drought where states weren’t willing to deal with this issue, despite the fact that their infrastructure wasn't in great shape,” said Carl Davis, research director at the Institute on Taxation and Economic Policy. “We’ve definitely seen a pretty rapid change on this issue — it’s really been pretty much a 180.”

Davis said the fall of gas prices during the past year, coupled with a rebounding American economy, gave state legislatures new latitude to raise taxes at the pump. But it’s been a long time coming for legislatures that have put off maintaining infrastructure. The result has been crumbling roads and unstable bridges across the country.

“When the recession hit, there wasn’t a lot of interest in raising prices at the pump,” Davis said. “When the economy improved, there was some catching up to do with gas tax hikes that were long overdue.”

On August 1, Washington became the most recent state to raise its gas tax, from 37.5 cents per gallon to 44.5 cents. Combined with another increase planned for next year, the state plans to use its new funds for projects like state and local roads, highway maintenance and bike paths.

But those increases alone won’t be enough to fully fund the state’s needs, according to Washington Department of Transportation spokesman Lars Erickson.

Even with higher gasoline taxes, state departments of transportation are facing a shortfall when it comes to paying for transportation. Iowa had one of the largest gas tax hikes this year, from 21 cents per gallon to 31 cents, and it’s just barely enough to make “critical” repairs in the state, said Stu Anderson, the Iowa Department of Transportation director of planning, programming and modal division.

Raising the gas tax won’t get the state anywhere near the estimated $1.6 billion Iowa officials estimate is needed for additional transportation projects and repairs.That’s why Iowa and other states rely so heavily on partnerships with the federal government. But partisan gridlock and “fiscal cliff” deadlines can make those risky bets.

The new gas tax “provides some more cushion,” Anderson says. But at the end of the day, he and other state transportation officials don’t have much recourse beyond anxiously watching and waiting for Congress.

Lawmakers on the Hill have passed dozens of short-term bills to keep the Highway Trust Fund from drying up. Already this year, Congress has skirted two deadlines with short extensions, keeping the trust fund alive through the end of October.

The president has called for a one-time tax on businesses operating overseas to replenish the Trust Fund, and some Republicans want to make large cuts to what the fund covers. When Congress returns from recess next month, they’ll need to work on a compromise to keep the trust fund solvent.

Maybe they’ll take a cue from the states.