Governors in Re-election Races Consider Shifting Road, Bridge Funding to Sales Taxes on Fuel

AASHTO Journal, 17 October 2014

​Two Midwest governors up for re-election this fall are talking about shifting their states’ motor fuel revenue streams to sales taxes on fuel and away from the current reliance on fixed, per-gallon fees.

Minnesota’s Mark Dayton, a Democrat, and Wisconsin’s Scott Walker, a Republican, each introduced the idea this month while discussing ways to improve funding for transportation infrastructure.

That points to a growing interest in some states to shift toward sales taxes instead of traditional fixed fees to generate revenue for transportation needs.

A percentage sales tax can let receipts rise or fall with underlying fuel prices, providing a form of inflation indexing. And it can be applied to upstream, wholesale prices rather than fixed at the retail pump.

A facet that draws supporters and critics is that enacting a sales tax can put the revenue stream on automatic pilot to grow without further action by legislators, who have to vote each time to change the per-gallon fixed charges that have long been the mainstay of highway and bridge funding.

Already, Virginia and Maryland have enacted varying forms of upstream fuel taxes for parts of their transportation funding, and some lawmakers in Congress are touting the idea as one way to help shore up the federal Highway Trust Fund.

Dayton, in an Oct. 8 debate with two other candidates for the Minnesota governor’s seat, said if re-elected he would propose a sales tax on gasoline. He said it would over 10 years generate the nearly $6.5 billion the state needs to cover a projected shortfall in transportation funding.

Both his opponents – Republican Jeff Johnson and Independence Party candidate Hannah Nicollet – said they would try to find the money elsewhere in the budget. However, MPR News reports Nicollet also said she would favor raising the current per-gallon gas tax if she could not find the money elsewhere for roads and bridges.

In neighboring Wisconsin, Walker raised a similar idea Oct. 13 in an interview with the editorial board of the Wisconsin State Journal newspaper.

Walker told the State Journal he is considering a revenue-neutral sales tax conversion to a sales tax on gasoline and alternative fuels, to stabilize transportation receipts in an era when average gasoline usage is falling. The newspaper said up to then neither Walker nor Democratic challenger Mary Burke had specified how they would cover a projected $680 million shortfall in the transportation fund in the next biennial budget.

Walker said “getting rid of the gas tax entirely” and replacing it with a sales tax is “a realistic thing for us to look at,” the State Journal reported.

Democratic candidate Burke met with the paper’s editorial board the next day, and said she would oppose levying a sales tax for transportation. “The last thing we want to do is have the transportation budget be subject to these wild fluctuations in gas prices,” she told the State Journal.

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