Crumbling Roads and Bridges Bring Higher Taxes and Fees
By DAVID A. LIEB
For the first time in nearly 30 years, Tennessee will soon tax motorists more to fill their tanks. So will California, Indiana and Montana.
Lawmakers across the U.S. have approved new proposals this year to pay for transportation improvements, including tax hikes, vehicle fee increases and bond packages. Those measures extended an existing trend to a new milestone: Two-thirds of all states have stepped up highway funding over the past five years.
It’s happening in both Democratic- and Republican-led states as their transportation departments strain to overcome backlogs deepened by the last recession. And lawmakers are acting regardless of promises from President Donald Trump for a $1 trillion national infrastructure program that his administration has yet to detail.
Some state officials doubt that Trump’s plan will make much of a difference when it comes to repairing and replacing thousands of old bridges or repaving and widening countless miles of congested roads.
“We really don’t know what’s in it. We haven’t seen anything,” said Tennessee state Rep. Eddie Smith, a Republican from Knoxville. But “it sounded like there wasn’t going to be a lot that we would directly benefit from.”
Trump has said his plan will depend partly on spurring private investment in infrastructure. That could include tax incentives for those who subsidize big-ticket projects, with an expectation that investors could recoup costs through tolls or fares on roads, bridges, rail systems or airports. Tennessee currently uses neither tolls nor bonds for its highway system.
At least two dozen states adopted higher fuel or sales taxes to pay for transportation improvements.
“That’s highly unusual for that many states to be in agreement about raising taxes, and these are oftentimes fairly conservative states as well,” said Carl Davis, research director at the Institute on Taxation and Economic Policy, a Washington-based nonprofit think tank.
The U.S. has an $836 billion backlog of needed repairs and improvements to roads and bridges, plus an additional $90 billion backlog for public transit systems, according to the Federal Highway Administration.
Those needs have grown as the money available from the Federal Highway Trust Fund for states fell by more than 9 percent from 2010 to 2015, according to an Associated Press analysis of the most recent figures from the highway administration.
A 2015 federal law increases Highway Trust Fund money for states by $20 billion over five years through traditional matching funds and new competitive grants. But some financial analysts project that will merely hold funding flat when accounting for inflation.
States are “bellying up to the bar and actually increasing their own gas taxes to make up for the lack of an increase of federal spending,” said Julius Vizner, an assistant vice president at Moody’s Investors Service.
Republican-led South Carolina, which has long resisted tax increases, is among those seriously considering a gas tax hike this year. Separate tax proposals have passed the House and Senate, even though Republican Gov. Henry McMaster has threatened a veto and wrote a letter to Trump in February asking for $5 billion in federal funding for infrastructure.
South Carolina House Majority Leader Gary Simrill said the federal money would be welcome but doesn’t provide a long-term solution. The state’s Department of Transportation wants an additional $1.1 billion annually over the next 25 years to improve roads.
“People who are waiting on the federal government usually just get old and tired,” said Simrill, a Republican who has led the House’s road-funding efforts for several years. “South Carolina cannot wait on the federal government to take care of our problem.”
The federal gasoline tax has remained at 18.3 cents a gallon since 1993, breaking a record this spring for its longest gap between increases. The last record was set when the tax remained at 4 cents from October 1959 through March 1983.
Trump recently said he could consider higher fuel taxes as part of his infrastructure plan, although that could meet resistance from fellow Republicans in Congress.
Only about a dozen states have gone longer than the federal government without raising their motor fuel taxes.
One of those was Tennessee, where Republican Gov. Bill Haslam signed a bill last month to phase in a 6 cent-a-gallon gas tax hike and a 10-cent diesel tax increase. To win passage in the Republican-dominated state, the fuel tax hikes were paired with tax cuts on groceries, investment gains, corporate manufacturers and disabled veterans so that supporters could tout them as “pocketbook neutral.”
The transportation plan in Republican-led Indiana raises an average of $1.2 billion annually by increasing gas taxes and vehicle fees and gradually shifting fuel sales taxes from the state’s general fund to infrastructure.
California’s $5 billion annual plan raises fuel taxes and vehicle fees to pay for repairs to state and local roads, while also providing money for public transit and biking and walking trails.
Montana, which suspended several road projects last year because of funding uncertainties, recently approved its first fuel tax increase in nearly a quarter century. Without the tax hike, the state could have missed out on some federal funding because it lacked enough local money to match it.
Although California’s plan was passed largely by Democrats, many other transportation funding measures have enjoyed bipartisan support. That’s partly because they have been backed by the business community as economic necessities, Davis said.
Transportation plans also have enjoyed widespread success at the polls. Voters approved 269 of the 361 transportation funding measures placed on the 2016 ballot by states, counties, cities, townships and other districts, according to the American Road and Transportation Builders Association. The nearly three-quarters approval rate was right on the 10-year average for transportation ballot measures.
Transportation funding measures also are pending in other legislatures, including Louisiana, Minnesota, Oklahoma and Oregon. A gas tax hike was defeated in the Missouri House this year and another was vetoed by New Mexico Gov. Susana Martinez, a Republican.
Earlier this year, Wyoming enacted a law that doubles vehicle and driver’s license fees. The measure, coming four years after a 10-cent gas tax hike, is intended to free up money in the state’s general fund, which has taken a hit because of the downturn in the energy sector.
Idaho, Utah and West Virginia all approved transportation bonding measures. The largest, a $1.6 billion proposal in West Virginia, is contingent upon voter approval later this year.