In the online version of Governing Magazine, columnist Penelope Lemov, discusses “approaches States could use to raise revenue for road repair and building” with Mark Robyn, an economist with the Tax Foundation. Below is an excerpt from their conversation.
Is this a good time for states to raise their motor fuel taxes?
…But people have to believe the money is being spent wisely. Not all states do that, and people say, “Well, I see this waste of money. If you increase my taxes, you’ll waste a portion of it.” When I say states are wasting money, I mean they are using it for road projects that people don’t see as valuable — the “bridge to nowhere.” If there are no “bridges to nowhere” and people are driving over potholes, they’ll be more willing to accept gas taxes to avoid potholes.
The way most state gas taxes are structured, the tax is a fee per gallon — not a percentage of the price. That means, the gas tax does not keep up with inflation. Should states incorporate a percentage of price into their gas tax formula?
…at some point maintenance is going to be more expensive in dollar amounts, even if a state never again added a highway and just maintained its current roads. If the cents-per-gallon charge remains the same for years, you could argue that it’s like a tax cut.
What else can states do about funding road repairs?
Some have recommended getting away from the current system of gallons of gas used and move to a mileage tax where you tax automobiles, tractor trailers and the like based on how many miles they drive. These approaches might have an advantage over the gas tax. It doesn’t matter if the car doesn’t use any gas: If you drive a mile, you get charged for a mile.