Branstad wants to build support for gas tax hike

Former Governor Chet Culver and former Republican gubernatorial candidate Chris Rants were vindicated today, as Governor Terry Branstad “encouraged transportation stakeholders to build support for a gas tax increase next year,” James Q. Lynch reported.

Last summer, Branstad said the timing wasn’t right for a gas tax increase, and today he told “representatives of highway associations and coalitions, local elected officials, engineers, economic developers and other stakeholders” that this year fiscal issues will take priority. Still, he made clear that he supports raising the gas tax to pay for more road construction in the future:

Having the resources to maintain and improve the transportation system is “absolutely critical to our goal of creating 200,000 jobs and raising incomes by 25 percent and making Iowa a growing and competitive state,” Branstad said.

That was welcome news to the transportation stakeholders who have lobbied in recent years for a gas tax increase to provide those resources. […]

“I want to team with you and help in this effort because I see it as part of what is critically important to our economic development success and achieving our ambitious job creation goals and income growth goals,” Branstad said.

According to Lynch, Branstad “repeatedly referred to motor fuel taxes as user fees that benefit motorists who pay it.” Earlier this month, a report by Iowa Public Interest Research Group demonstrated that “gas taxes cover barely half the costs of building and maintaining roads,” and “[t]he amount of money a particular driver pays in gasoline taxes bears little relationship to his or her use of roads funded by gas taxes.” The governor isn’t worried about taxpayers subsidizing roads for other people, to the tune of hundreds of millions of dollars a year, but he’s deeply troubled by a small subsidy for passenger rail.

I wouldn’t be surprised if Branstad backs a sales tax increase a year or two down the road. Last April, he told the Sioux City Journal editorial board that his “long-range plan” on taxes was “to have more of a thing on consumption.” Shifting to draw more state revenues from consumption taxes (like the sales and gas tax) and less from income and property taxes would make Iowa’s already regressive tax structure even worse.

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Borrow money for infrastructure, but fix what we have first

The highlight of Governor Chet Culver’s “condition of the state” address yesterday (video here and prepared text here) was a proposal to issue state bonds to borrow up to $700 million over the next few years:

Thousands of new jobs will be created, Culver said. Every $100 million spent on highway construction alone means more than 4,000 new jobs, he said.

“We’re cutting back on the day-to-day expenditures of state government,” Culver said in his Condition of the State speech this morning. “But, at the same time, we will be investing in bricks and mortar – to create jobs and keep our economy going.”

Culver said Iowa won’t need to raise taxes to pay for the plan. The state is in the position to issue bonds, which is essentially borrowing money. Existing gaming revenue would repay the bonds, he said.

Predictably, road industry lobbyists like the spending plans while expressing some doubts about the borrowing plans.

Republicans also don’t seem to like the bonding proposal, while statehouse Democrats think it’s a good idea. State Auditor David Vaudt, who may be a Republican candidate for governor in 2010, said he needed to study the details before expressing an opinion, but noted, “What we’ve got to remember is we’ve got to dedicate and set aside a piece of revenue stream to pay that principal and interest.”

Senate Majority Leader Mike Gronstal made a great point:

Gronstal deflected Republican criticism by pointing out that [Senate Minority leader Paul] McKinley, in his opening day speech, talked about a business he once owned.

“He borrowed every nickel he could and leveraged himself as far as he could because he believed in his future. I believe in Iowa’s future. I believe it makes sense now to borrow money and move this state forward,” Gronstal said.

He added: “This is probably one of the best times in our history to go out and borrow money with a dedicated repayment stream. Do you own a home? Did it make sense for you to borrow money? Or did you just pay cash?”

Gronstal is absolutely right. Iowa has a triple-A bond rating, interest rates are fairly low, and creating jobs is essential to bringing the economy back. Two-thirds of our economy depends on consumer spending, and good jobs generate the money people then spend at businesses in their communities. Construction jobs tend to be good jobs too.

Des Moines Register columnist David Yepsen, who is usually a deficit hawk, also likes the infrastructure bonding idea:

The money will be borrowed over the next few years, supervised by an oversight board and repaid with gambling profits, so no tax increases will be necessary. (If we have to have all this gambling in Iowa, wouldn’t it be nice to see something tangible in return?)

It will be the modern-day equivalent of the Depression-era Works Progress Administration, which built infrastructure we still use today, such as dams, sewers, parks and shelters. Previous American generations left us wonderful systems of interstates, canals, railroads, river locks and dams. What are we leaving our kids? Potholes, bridge collapses and sewers that pollute river ways.

Iowans are a frugal people. Perhaps we are too frugal. According to state Treasurer Mike Fitzgerald’s office, Moody’s Investors Service says Iowa’s per-capita level of public debt ranked 48th in the country last year. Iowa has $98 of state public debt per person. The national average of state debt is $1,158. You could double Iowa’s $98 of per-capita state debt to $200, and we would then rank 46th.

Culver should have told us that. Clearly, most other states saddle their citizens with more debt than is proposed here. And many are more attractive places to live, too, as our children attest when they leave for the better jobs and brighter lights elsewhere.

It’s funny to watch all these Republican legislators, who borrow all sorts of money to buy, expand or repair homes, businesses and farms, now turn prune-faced when Culver suggests doing the exact same thing in state government.

The Des Moines Register explained how Culver’s plan would work:

* Borrow $700 million in 20-year tax-exempt state revenue bonds

* Secure the bonds with about $56 million a year in gaming tax revenues

* Create a Rebuild Iowa Infrastructure Authority to issue the bonds. It will be overseen by a five-member board.

* The authority would be administered and staffed by the Iowa Finance Authority.

How money will be spent:






mass transit



water quality and wastewater treatment improvements

flood control improvements

energy infrastructure

disaster-relief infrastructure

public buildings

Projects will be judged on:

Whether they are ready to proceed

How quickly the project can be started and completed

Number of jobs to be created by the project

Contribution to sustainability

On the whole, I support the idea. My main concern is that infrastructure money be spent on fixing what we already have, not on building every new road on developers’ wish lists. In the past, our legislators and state officials have focused too much on funding new roads instead of a balanced transportation policy.

The housing slump is likely to continue for at least two more years, and there is no reason to spend large sums to build new highway interchanges and major new roads through undeveloped farmland now. We should spend the money to fix stretches of existing major roads and highways and crumbling bridges, as well as on modes of transit that allow alternatives to driving. These projects will improve the quality of life for large numbers of Iowans while also creating jobs.

As for airports, I would only support spending money on needed repairs and improvements to existing airports. This is not the time to start building a bunch of small regional airports that would benefit a handful of corporate executives.

Culver emphasized that he did not plan to raise taxes, but Gronstal indicated that raising the state gas tax is still on the table.

I would like to hear more lawmakers talk about closing various tax loopholes that mainly benefit wealthy Iowans. The Iowa Policy Project has documented this and various other flaws in our current tax policies.

If you’ve got the time and the inclination, the governor’s official website has a video Culver showed during his address, called “In Deep Water: The Flood of 2008.” Iowa Public Television has House Minority leader Kraig Paulsen’s response to Culver’s address.

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Gronstal and Kibbie set the tone on the Iowa Senate's opening day

The Iowa Legislature opened its 2009 session today, and Senate Majority Leader Mike Gronstal let the members of the upper chamber know that he has “never seen such a tough situation” with the state budget and economy in his 26 years at the statehouse.

In his opening address the the Iowa Senate, Gronstal listed some of the biggest challenges facing legislators, in particular rebuilding communities damages by last year’s natural disasters and leading Iowa “through these tough times without sabotaging the commitments we’ve made on economic growth, health care and education.”

He warned that a lot of legislators won’t get what they want this year:

Our resources are limited.  We will say “no” to many good ideas.  We are going to disappoint some people and frustrate others.

If your idea of being an elected official involves being loved by everyone, the next few months will be pretty rough.

Gronstal also noted that bipartisan majorities approved many key policies in Iowa during the past few years, and called for finding “bipartisan solutions” to this year’s challenges.

In his opening address to the chamber, Senate President Jack Kibbie echoed Gronstal’s warning that leaders will be saying “no” to a lot of requests from legislators.

He also advocated some policies that are anything but bipartisan: a gas tax hike and the expansion of workers’ bargaining rights.

Kibbie said increasing the gas tax would create jobs and boost economic development:

First, we can no longer put off the challenges to our transportation infrastructure. It is vital that we begin to clear the backlog of projects that play a  significant role in future economic development. In my district my constituents, Republicans and Democrats, all tell me that we need to get to work and if the only impediment to that progress is money they are willing to pay a few more cents at the pump. I support efforts that result in a gas tax increase. Success in that endeavor will mean better roads, jobs, and an economic boost to Iowa’s families and communities.

I’ve supported a gas tax increase since John Anderson proposed it during his 1980 presidential campaign, but I don’t expect that measure to get through the legislature without a bruising battle.

Here’s a piece listing the many potential benefits of a federal gas tax increase. Kibbie is talking about a smaller increase in the state gas tax, but many of the same benefits would apply.

Kibbie also said Iowa workers need good wages, and therefore “we should not fear passing Legislation that help[s] workers bargain for a better future.”

Kibbie could be referring to the “fair share” bill that Democrats didn’t have to votes to get through the Iowa House in 2007, or to the collective bargaining bill that Governor Chet Culver vetoed last spring. Either way, Republicans and corporate interest groups will put up a fight.

Getting labor legislation through the Iowa House, where Democrats have a 56-44 majority, is likely to be more difficult than getting it through the Iowa Senate, where Democrats have a 32-18 majority.

The complete texts of the opening statements by Gronstal and Kibbie (as prepared) are after the jump.

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Even a stopped clock is right twice a day

For the first time that I can remember, I agree with one of Charles Krauthammer’s syndicated columns:

You want more fuel-efficient cars? Don’t regulate. Don’t mandate. Don’t scold. Don’t appeal to the better angels of our nature. Do one thing: Hike the cost of gas until you find the price point.

Unfortunately, instead of hiking the price ourselves by means of a gasoline tax that could be instantly refunded to the American people in the form of lower payroll taxes, we let the Saudis, Venezuelans, Russians and Iranians do the taxing for us — and pocket the money that the tax would have recycled back to the American worker.

This is insanity. For 25 years and with utter futility (starting with “The Oil-Bust Panic,” the New Republic, February 1983), I have been advocating the cure: a U.S. energy tax as a way to curtail consumption and keep the money at home. […]

Want to wean us off oil? Be open and honest. The British are paying $8 a gallon for petrol. Goldman Sachs is predicting we will be paying $6 by next year. Why have the extra $2 (above the current $4) go abroad? Have it go to the U.S. Treasury as a gasoline tax and be recycled back into lower payroll taxes.

Announce a schedule of gas tax hikes of 50 cents every six months for the next two years. And put a tax floor under $4 gasoline, so that as high gas prices transform the U.S. auto fleet, change driving habits and thus hugely reduce U.S. demand — and bring down world crude oil prices — the American consumer and the American economy reap all of the benefit.

Krauthammer came late to this party–I supported Republican presidential candidate John Anderson’s call for a 50-cent hike in the gas tax way back in 1979-1980. (The Republican Party was not yet fully in control of the anti-tax zealots back then.)

Unfortunately, we kept the price of gas artificially low for so many decades that we’ve developed most of our suburban neighborhoods in a way that makes people depend on cars to get around. It will take some time to change our mindset and make our neighborhoods more bike-friendly and accessible by public transit.

I discussed other things individuals and governments can do to reduce our consumption of gas in this post.

Speaking of transportation policy, Democratic State Senator Matt McCoy has an op-ed in Saturday’s Des Moines Register about a bill in Congress that would (in his view) impose unnecessary regulations on the freight rail industry.

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Increasing our use of coal is worse than a gas tax holiday

As I have said before, I think Hillary Clinton was wrong to make a summer gas tax holiday the centerpiece of her campaign for several weeks. I am glad that didn’t pan out for her in the Indiana and North Carolina primaries.

However, as bad an idea as a gas tax holiday would be (delivering more profits to oil companies, not really helping consumers, not helping to reduce our demand for oil), it would only be bad for a few months.

Take a look at the ad Obama is now running in Kentucky:

Also view the direct-mail piece the Obama campaign has sent out in Kentucky.

Now, maybe Obama is only pandering to Kentucky Democrats to avoid a blowout in the May 20 primary, but my fear is that if elected he would actually follow through and invest more national resources in so-called “clean coal.”

Every new coal-fired power plant built is a 50-year investment in the wrong direction, with much worse long-term consequences for our climate and environment than any summer holiday from the federal gas tax.

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Gas tax spat roundup and Indiana/North Carolina predictions open thread

Elected officials and policy advocates are getting increasingly annoyed by Hillary Clinton’s decision to make this nominating contest about her really bad proposal to suspend the gas tax this summer and pay for it with a windfall tax on oil companies.

Today Tom Harkin weighed in on the issue, telling reporters that Congress will not take up this proposal. Even if the gas tax holiday were enacted, Harkin suggested, consumers would not benefit much, and the Iowa Department of Transportation would lose about $75 million in revenues to rebuild infrastructure.

Friends of the Earth Action, which supported John Edwards for president and had been sitting out the campaign since he left the race, today endorsed Barack Obama, largely because of the gas tax issue:

“We endorse Senator Obama because we believe he is the best candidate for the environment,” said Friends of the Earth Action President Brent Blackwelder.  “The ‘gas tax holiday’ debate is a defining moment in the presidential race.  The two other candidates responded with sham solutions that won’t ease pain at the pump, but Senator Obama refused to play that typical Washington game.  Instead, Obama called for real solutions that would make transportation more affordable and curb global warming.  He showed the courage and candor we expect from a president.”

Friends of the Earth Action ran radio and television ads on behalf of Edwards in the early-voting states, and the group is now running this ad supporting Obama:

As I’ve said many times, I would vote for either Obama or Clinton in the general and have no strong preference between the two. I would hate to see Hillary gain the inside track for the nomination through this kind of political posturing, though. It’s such a bad idea on so many levels.

Obama appears to be feeling the heat on this issue. A few days ago his campaign put out a television ad calling the gas tax holiday a “bogus” idea that would just help big oil companies (click the link to view that ad). However, his closing ad in Indiana and North Carolina moves away from that issue to a more general message:

Meanwhile, Clinton seems to think she has hit pay dirt, and has made the gas tax the focus of her closing ad in the states that will vote tomorrow:

For a laugh, I highly recommend this diary by Matt Stoller, CONFIDENTIAL/URGENT POLITICAL PROPOSAL, which skewers Hillary’s proposal on the gas tax by presenting it in the format of those scam e-mails promising to make you rich.

Please put up your predictions for the Indiana and North Carolina primaries in the comments. I say these results will be mirror images of each other: Obama will win NC 55-45, and Hillary will win Indiana by the same margin.

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