States taking action on fuel tax hikes to address infrastructure needs

When it comes to addressing the yawning infrastructure needs of this country, many state legislatures and governors are basically saying, “Who needs Washington? Let’s do it ourselves.”
 
Absent a long-term highway funding mechanism and abhorrent to raise the federal tax on fuel that is unchanged since 1993, Congress has voted 34 times to kick the can down the road with short-term funding “continuing resolutions” since 2005. The latest runs out Oct. 29, and don’t be surprised if you see another two- or three-month extension after that.
  
As the Wall Street Journal deadpanned in a recent editorial: “The stature of Congress is rarely enhanced by highway bills, and this season is no exception.” 
 
Meanwhile, about one-third of the states have raised their fuel taxes or incorporated other levies to help cover the cost of maintaining highways and bridges, according to a survey by the Associated Press. These include about half the states run by Republican governors, who are usually abhorrent to raising any types of taxes.
 
“There’s a lot of voices that say let’s push this off,” Tennessee Gov. Bill Haslam (R) told the AP.  “But the need is not going to go away. We’re going to have to do something to address this.”
 
Among the states that already have taken action this year:
-Connecticut Gov. Daniel Malloy (D) authorized a $2.8 billion bond project as part of a special $10 billion, five-year transport plan. Malloy has said he hopes this is the start of a 30-year, $100 billion overhaul;
-Delaware Gov. Jack Markell (D) increased the vehicle sales tax to 4.25 percent, a move that will garner $330 million over six years;
Georgia Gov. Nathan Deal (R) signed a deal to raise that state’s fuel tax to 26 cents on gasoline (29 cents on diesel) and other fees designed to raise $1 billion over five years;
-Idaho Gov. C.L. “Butch” Otter (R) raised the Potato State’s fuel tax by 7 cents and added other fees to raise $95 million annually;
0Iowa Gov. Terry Branstad (R) has raised his state’s fuel tax by 10 cents, the first hike since 1989, as part of a $215 million transport package;
-Louisiana Gov. Phil Bryant (R) issued bonds to raise $200 million to rebuild bridges;
-Nebraska Gov. Pete Ricketts had his veto overturned as the Republican-controlled state legislature OK’d a 6-cent increase in the fuel tax to raise $215 million over five years; and
-Washington Gov. Jay Inslee (D) raised that state’s fuel tax by 7 cents and another 4.9 cents next July 1 as part of a package of fee hikes to raise $16 billion over the next 16 years.

In addition, other states are planning moves to address their infrastructure deficits. In Nevada, for example, Gov. Brian Sandoval (R) has placed on the November 2016 ballot an initiative that would index local fuel taxes to the rate of inflation. Such a move would raise millions for transportation needs.
  
Transport is proving to be an easy sell among voters even in some anti-tax locales. In Phoenix, for example, voters recently approved a major boost in transportation funding for new light rail lines, bus expansion and street improvements over the next several decades. The measure passed by 55-45 percent.

Under the proposal, Phoenix’s 0.4 percent sales tax for transit will increase to 0.7 percent for transportation, beginning Jan. 1 and lasting 35 years. The sales tax is the foundation of a $31.5 billion plan that will be funded by a variety of federal grants and fares.

But in California, which has some of the highest fuel costs in the nation at nearly $4 a gallon, voters are pushing back. California state lawmakers are considering legislation that would increase the state’s approximately 42-cents-per-gallon gas tax by 12 cents.

But a poll conducted by University of California Berkeley’s Institute of Governmental Studies found 63 percent of voters against such a proposal.
  
Despite inaction by Washington, Americans seem to sense the growing need for increased transport spending. The U.S. Chamber of Commerce, which has been pushing for a long-term infrastructure bill to no avail the last six years, has estimated $1 trillion is needed over the next few years just to keep pace with necessary upkeep.
  
Americans lose in excess of $121 billion annual due to congestion, according to the Chamber. The Highway Trust Fund, which in the past has provided the lion’s share of federal funding for highways, is drying up.

The federal government typically spends about $50 billion a year on transport. But the federal fuel tax only brings in about $34 billion a year. Since 2008, Congress has transferred nearly $62 billion from the general fund to keep the Highway Trust Fund afloat.

There is talk of a pre-Christmas measure supported by Rep. Paul Ryan, R-Wis., chairman of the House Ways and Means Committee, that would tackle a complex, long-term tax simplification measure that would raise enough money to sufficiently fund a five- or six-year highway bill.

Such a measure has some bipartisan support in the Senate. Notable backers include Sen. Chuck Schumer, D-N.Y., and Sen. Orrin Hatch, R-Utah. But the tax simplification bill is complex, and the timeline is short. There is virtually no chance of such a sensitive topic as taxes being tackled in 2016, an election year.

So if it doesn’t happen by Christmas, chances are Congress will kick the can down the road one more time with a short-term funding resolution. There is another major hurdle, and that is the lack of bipartisanship in both houses.

As Sen. Schumer, a member of Senate Finance Committee, said of the prospects of tying infrastructure spending to tax reform: “If it’s not bipartisan, it’s not going to fly.”