WASHINGTON — While members of Congress have been loathe to take the politically unpopular step of raising the federal gas tax, which provides revenue for bond-financed roadwork and other highway projects, a number of states have increased their gas taxes during the past few years.
The latest proposal comes from Maryland Gov. Martin O’Malley, who would raise that state’s gas taxes to the highest level in the nation. O’Malley, a Democrat who must tackle a $1.1 billion budget gap for fiscal 2013, is proposing to apply a 6% sales tax on gas on top of the existing 6% tax. His proposal has drawn criticism from Maryland Republicans and it is not clear whether the General Assembly, where Democrats are in the majority, will pass the tax hike.
During the past year alone, California, Connecticut, Florida, Georgia, Hawaii, Illinois, Indiana, Kentucky, Maine, Michigan, Minnesota, New York, North Carolina, Oregon and Vermont have either increased their gas tax, or in the case of Vermont, enacted a first-time 2% tax, according to Joung Lee, an associate director at the American Association of State Highway Transportation Officials. Another 10 states have raised their gas taxes since 1993, which was the last time Congress increased the federal gas tax by 18.4 cents per gallon.
Julius Vizner, an analyst at Moody’s Investors Service, said that states looking for a way to fund their roads in a time of flat federal spending might find “an increased acceptance” of a gas tax hike.
States often use gas tax revenues to back bonds financing highway projects, and the depleted purchasing power of those revenues means states issue fewer bonds.
“Generally, if they don’t raise more tax, they don’t issue new debt,” said Standard and Poor’s analyst Peter Murphy.
States that haven’t raised the gas tax in decades, like Maryland, have turned to public-private partnerships or redirected other taxes to their transportation funds.
States provide half of all surface transportation funding, Lee said, and help from Washington isn’t likely to come soon — transportation bills aim to do more than maintain current highway-funding levels.
They cannot rely on the Highway Trust Fund — which is fueled by federal gas taxes and other user fees and funds highway projects — because it hasn’t kept pace with growing transportation needs.
Inflation, more fuel-efficient vehicles, and a tendency by drivers to drive less in a down economy is hurting that revenue stream, with Congressional Budget Office projections showing that the trust fund is likely to reach insolvency next year. Despite grim prediction, lawmakers scrambling to put together a multi-year reauthorization of transportation programs have not pushed for a fuel tax increase.
House Republicans laboring on a $260 billion, five-year reauthorization offered by Transportation Committee Chairman John Mica, R-Fla., propose feeding the trust fund with revenues from expanded domestic oil and gas production. Senate Democrats backing a $109 billion, two-year bipartisan bill from Sen. Barbara Boxer, D-Calif., prefer redirecting existing taxes and eliminating tax exemptions on cellulosic biofuels.
As the Senate Finance Committee debated funding for the bill Tuesday, Sen. Michael Enzi, R-Wyo., acknowledged the political thorns surrounding the issue. “I know there are a lot of sensitivities in talking about the rate of the motor fuel tax,” heEnzi said. “There is no doubt that individuals and businesses are still stressed in this economy and are struggling to make ends meet.”