Iowa’s well-documented problems with roads in disrepair and deficient bridges have prompted many calls for raising the gasoline tax in recent years. I’ve been skeptical that a divided state legislature would agree to raise an unpopular tax during an election year-session following redistricting. However, key lawmakers continue to insist that a gas tax hike is on the table. Arguments for why this proposal will and won’t pass are after the jump.
Several factors suggest that legislators may approve a gas tax increase during the 2012 session.
1. Senior lawmakers from both parties have already agreed on a joint plan. This isn’t like commercial property tax reform, which both parties support but would address in very different ways. Republican Iowa House Transportation Committee Chair David Tjepkes and Democratic Iowa Senate Transportation Committee Chair Tom Rielly called a press conference last week to drum up support for their joint proposal. Yesterday Tjepkes and Rielly again predicted they would succeed in passing their plan:
“All of us have come together and agreed that we have a long-term systemic problem of funding for roads,” said Sen. Tom Rielly, D-Oskaloosa. “What’s driving this is the increase in construction costs.”
Legislators appear to be gravitating toward a proposal that seeks about $50 million in savings from the Department of Transportation in the fiscal year beginning July 1, followed by a 4 cent increase in the fuel tax in each of the following two years. The hike would apply to both gasoline and diesel fuel.
“It’s a bipartisan effort,” said Rep. Dave Tjepkes, R-Gowrie. Tjepkes and Rielly head the Transportation Committees in the House and Senate and are in key positions to push the effort.
The gasoline tax is currently 21 cents per gallon for gasoline and 19 cents for ethanol-blended fuel. Each penny increase in the tax generates roughly $22 million.
2. Governor Terry Branstad is open to the idea. When Iowa legislators talked about raising the gasoline tax a few years ago, Governor Chet Culver ended the discussion with a veto threat. Branstad had said in November that he wouldn’t support raising the gasoline tax, but this week he suggested he might sign a bill this year, as long as the tax increase would not go into effect before the 2014 fiscal year. The governor’s own advisory commission on transportation issues strongly recommended raising the gasoline tax last fall.
3. Well-funded interest groups support the policy. More funding for road and bridge repairs creates jobs in the short term, and better infrastructure contributes to economic growth. Road-builders and the Iowa Farm Bureau, which tend to support conservative politicians, are on board. So are some labor unions, which could influence Democratic legislators. The Iowa League of Cities, which has a lot of lobbying muscle at the statehouse, was represented at Tjepkes’ and Rielly’s press conference last week.
4. The problems with roads and bridges transcend Iowa’s urban/rural divide. You don’t become the third-worst state in the country for deficient bridges if the problem is isolated in a few parts of the state. Shabby roads are a problem in every legislator’s district. Wayne County Supervisor Amy Sinclair, the Republican candidate in Iowa Senate district 14, remarked last week that as she meets with voters around the district, “she hears about lots of issues with roads.”
5. The gasoline tax affects more out-of-state residents than other state taxes or fees. Proponents are using this argument:
“I’m tired of just Iowans [bearing] this burden,” said Sen. Tom Rielly, D-Oskaloosa, chairman of the Senate Transportation Committee who noted statistics showing 35 percent of large truck traffic and 15 percent of passenger cars are from outside of the state.
Rielly continued: “We’d like to take this initiative right now and work with the governor and work in a bipartisan way to put people back to work, improve the safety of our roads and get people from outside of the state of Iowa to pay their fair share.”
Tjepkes made the same point yesterday:
There have been some suggestions that part of the additional road funding could come from increasing the registration fees on vehicles, but Tjepkes said there is resistance to that idea. That resistance comes largely because roughly 20 percent of the gasoline taxes collected in the state comes from drivers who don’t live in Iowa, while all of the vehicle registration fees are paid by Iowans.
“The conversations that I’m having is that most people like putting it all on the gas tax because it’s a user fee and 20 percent of it comes from users who are not Iowa residents,” said Tjepkes. He said many details remain to be settled.
I can just as easily make the case that a gasoline tax is going nowhere.
1. The most vocal proponents of this policy are lawmakers with nothing to lose. Tjepkes is retiring this year. So is Democratic Iowa Senate President Jack Kibbie, who called for a gas tax hike on the opening day of this legislative session. Rielly hasn’t said whether he will seek a third term in the Iowa Senate, but the new map put him in such a Republican district that it hardly matters whether he is on record proposing a tax increase.
2. Leaders in both chambers are non-committal. Senate Majority Leader Mike Gronstal had this to say:
Senate Majority Leader Mike Gronstal, D-Council Bluffs, withheld his full support for a gas tax hike, suggesting there’s no point spending political capital if Branstad’s not on board.
Whether legislators support a tax hike, he said, will depend on the situation in their district.
“It is a different issue in every district,” he said. In districts where roads are in good shape “they don’t really particularly see the need for it. So, I think there is going to be some that are for it, some that are against it.”
Iowa House Speaker Kraig Paulsen doesn’t sound completely sold either:
House Speaker Kraig Paulsen, R-Hiawatha, said his initial focus would be on seeking efficiencies in highway spending.
“We are going to work through the current money that Iowans send us and make sure it’s spent wisely and correctly and that our bridges and roads are safe,” said Paulsen. After that, any discussion of a tax hike is uncharted territory, he said.
“I have not vote-counted on it,” said Paulsen.
I don’t doubt that Tjepkes and Rielly can get a bill through their committees, but it will take some heavy lifting to get a majority vote in both chambers.
3. Many legislators represent competitive House or Senate districts. Iowa has an unusually large number of legislative districts that either party could plausibly win. The redistricting process means that many state representatives and senators will be seeking re-election on somewhat unfamiliar territory. Who wants to be accused of raising the gas tax under those circumstances?
During last fall’s special election campaign in Iowa Senate district 18, both the Democratic and Republican candidates distanced themselves from the idea of raising the gas tax. That’s no surprise, when you consider that the overwhelming majority of Iowa voters are affected by the price of gasoline. I doubt many voters realize that the state gas tax hasn’t been raised in more than 20 years. Even if the bill is structured not to raise the tax until July 2013, the perception will be that legislators voted for a tax increase in a tough economy.
What do you think, Bleeding Heartland readers? Can a bipartisan deal to raise the gasoline tax pass a divided legislature in an election year?
UPDATE: Radio Iowa’s O.Kay Henderson quotes two economists who support a gas tax increase:
Creighton University economist Ernie Goss says he is “supportive” of taxes which are used for well-known purposes – and the gas tax is used specifically for road maintenance and construction.
All taxes, to some degree, are economic depressants, but the positive on the infrastructure side could outweigh that,” Goss says. “In other words, having poor roads is not what you want in Iowa.” Iowa State University economist David Swenson says it’s not just state roads that get financed by the gas tax, but city streets and county roads are built and maintained with that money, too.
“If I just looked at the average Iowa commuter over the course of a year, a 10 cent (per gallon) increase in the gas tax would cost them a whopping about $32, so we’re really not talking about a tax that’s going to have a significant impact on your average household,” Swenson says.
“But not having good roads, having roads that are in disrepair is hard on your cars and increases costs (to drivers).”
Swenson makes a valid point, but one could counter that many people drive primarily on local streets and roads, whereas gasoline taxes pay for repairs primarily to federal and state highways. So paying additional gasoline taxes would not necessarily lead to repairs on the roads drivers are using most.
Branstad told the Cedar Rapids Gazette editorial board that he might support what he called a “motor fuel user fee” increase as part of “maybe a two-step process”:
Branstad encouraged lawmakers to educate the public about the need for the increase.
“I don’t think there is widespread public understanding that we have a road crisis,” he said, adding that despite improvements in the state’s economy, “a lot of people are still hurting.”
The DOT is in good shape for the coming construction season, Branstad said. As a result of favorable bid prices, budget savings and about $128 million more in federal funding than expected, the transportation budget is in good shape for the coming year.
“We’re going to be able to have one of the most robust road-building programs for this coming year than we’ve ever had,” Branstad said.
While running for governor, Branstad criticized Iowa’s use of “one-time” federal stimulus funding and opposed additional federal Medicaid and education funding in the summer of 2010. Somehow I’m not surprised that he is enthusiastic about extra federal money for Iowa roads, now that he’s in a position to take credit for the construction projects.
LATE UPDATE: The advocacy group Iowans for Tax Relief came out against a gas tax hike on January 18:
Muscatine, IA. — Iowans for Tax Relief today urged the Iowa Legislature, “Do not raise the gas tax on Iowans at a time when gasoline prices are predicted to spike.”
Rob Solt, ITR President, said, “ITR supports the Governor and Legislators who plan to ask the Department of Transportation to find efficiencies to help pay for road repair, rather than a blanket gas tax increase that would harm Iowans’ wallets.”
“More research needs to be done before Legislators even bring up the idea of a gas tax increase. Iowans have been told up to 20% of gas tax revenue would come from visitors traveling through Iowa, but we have not found any research on how Iowa’s border communities would be affected by higher gas taxes.
“ITR believes a study of border communities would find that significant numbers of non-Iowans, who come to Iowa weekly to buy gas, groceries, etc, would rethink those trips and stay home if Iowa had a higher gas tax. Before considering any gas tax hike, the Legislature needs to take a hard, close look at the overall consequences.”
Solt added, “Economists are predicting gas prices this summer may be at all-time highs. This is the wrong time to consider an increase when Iowans will already be paying a larger portion of their family budgets for transportation.”
“We encourage the Governor and Legislators to require thorough research on the gas tax with a dynamic model that helps them see clearly all the positives and negatives,” Solt concluded.