Study Urges Increases in Gas Taxes

Thursday, 15 Dec 2011 11:19 AM

By Greg McDonald

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A new report is urging an increase in stagnant federal and state gas taxes to help close the gap in needed funding for transportation projects and other programs that governments are unable to pay for without looting from other general fund sources.
 
In a 50-state analysis, the Institute on Taxation and Economic Policy found that states are losing over $10 billion a year in transportation revenue because of their reluctance to update their gas taxes to keep pace with the real costs of making improvements to roads, bridges, and other projects vital to economic commerce.

Losses from their federal gas taxes, which haven’t been raised since 1993, are also contributing to the problem.

“Unfortunately, many politicians won’t consider touching the gas tax,” said institute senior analyst Carl Davis, who authored the report released Wednesday. “They are raising sales taxes, fees on vehicles, tolls on roads, even looting education funds, all to make up for the stagnant gas tax. But they can’t bring themselves to modernize the biggest source of transportation revenue that’s actually under their control.

“It makes no sense,” he added.

The institute analysis estimates that states lose on average about $201 million in revenues that could come from a small increase in the gas tax. More populous states, such as Virginia, Maryland, New Jersey, and Massachusetts, lose more than $500 million a year by refusing to update their gas taxes.

The analysis found that the average state hasn’t increased gas taxes in over a decade. Fourteen of them have gone longer than 20 years without an increase, while the costs of paving roads and building bridges has steadily risen.

As a result, many states have moved money from other sources to help shore up transportation repair costs, leaving other important programs under funded.

“It’s basic math,” said Davis. “The road repairs you could buy in 1990 with 20 cents, for example, are going to cost 34 cents today. But we still see some states collecting the same flat 20-cent tax they did back in 1990. That’s the definition of unsustainable.”

As a part of gas tax reform, which includes pegging the tax to rise with the cost of transportation construction costs, the report recommends that targeted tax credits be created to help offset the impact on low-income families.

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