TranspoAdvocate NewsState & Local Funding News
TIAC staff tracks the latest state and local transportation funding news and provides regular updates on TranspoAdvocates News. To contribute to these efforts, contact Carolyn Kramer.
April 27: 4 More States Set to Increase Gas Taxes to Support New Transportation Investments; New Analysis Shows Little Political Fallout
91% of legislators who supported an increased gas tax were reelected during the next general election; 98 % of lawmakers won their 2016 primary race.
(WASHINGTON)—An examination of more than 2,500 state legislators from 16 states finds 91 percent of lawmakers who supported legislation to increase their state gas tax between 2013 and 2015 and ran for re-election won their seat during the next general election.
The analysis, from the American Road & Transportation Builders Association’s Transportation Investment Advocacy Center (TIAC), comes as legislators in four states—Tennessee, Montana, California and Indiana—have voted this month to increase their state gas tax to support new transportation improvements. The respective governors of each state are expected to sign the measures. It brings to 21 the number of states that have increased fuels taxes since 2013.
For Republican state legislators who supported a gas tax increase, 95 percent were reelected, the same reelection rate as those officials who voted against the gas tax increase. Democrats who voted for a gas tax increase were reelected at 89 percent, compared to 86 percent who voted against the same legislation.
“The voters in these states understand that lawmakers are showing political will to increase resources for transportation investment. For the majority of these states, their gas tax had not been raised in over 15 years,” said ARTBA Chief Economist Dr. Alison Premo Black. “It is now up to Congress and the Trump administration to address the stability of the Highway Trust Fund, which provides revenue for over half of all state highway program capital outlays.”
More than 91 percent of legislators who sponsored bills to increase their state gas tax were also reelected.
Additional analysis of the 2016 primary elections in the eight states that passed a gas tax increase in 2015 found that 98 percent of the Republican and 98 percent of Democratic lawmakers who approved a gas tax increase and ran for their seat in a primary race moved on to the general election, compared to 97 percent of legislators who had voted “no” on the gas tax increase.
Read the full report.
The Tennessee legislature gave final approval on April 24 for the “Improving Manufacturing, Public Roads and Opportunities for a Vibrant Economy” (IMPROVE) Act, a bill that will:
- Gradually increase the state gas tax by 6 cents-per-gallon (beginning with a 4-cent increase on July 1 and a 1-cent increase every July 1 for the next two years) and the diesel tax by 10 cents-per-gallon;
- Create an annual $100 road user fee on electric vehicles and increase taxes on alternative fuel;
- Raise vehicle registration fees by $5 for Class A through Class H vehicles, by $10 for private and commercial motor vehicles operating for hire and who transport passengers, and by $20 for trucks and truck tractors;
- Permit municipalities to seek voter approval for a surcharge on their local privilege taxes to be dedicated to public transit projects.
All revenue, including an annual 2 percent diversion to the state’s General Fund, will be dedicated to transportation purposes.
In order to balance the increased transportation funding and offset the increase in user fees, the bill will reduce the state’s sales tax on groceries, decrease the franchise and excise tax paid by businesses, and phase out the Hall income tax. The tax cuts are estimated to total $300 million after full implementation.
The IMPROVE Act— also called the “2017 Tax Cut Act”— is expected to generate $350 million annually for transportation funding, with $245 million of the revenue allocated to the Tennessee Department of Transportation, $35 million to cities, and $70 million for counties.
The House voted 60-37 to advance the bill on April 19 after numerous hours of debate on proposed amendments, including proposals to eliminate the motor fuel tax increase, utilize revenue from the state’s budget surplus and reallocate a portion of the state sales tax for transportation purposes. The Senate picked up the bill later the same day and voted 25-6 to approve with bipartisan support, but added an amendment to increase property tax relief for disabled veterans and sent the legislation back to the House for final approval. On April 24 the House voted 67-21 to send the bill to the governor.
April 26 Update: Gov. Bill Haslam (R), a vocal advocate of the IMPROVE Act, signed the bill into law on April 26.
Tennessee is the fourth state to legislatively increase its gas tax in 2017, and the 21st state since 2013. Read ARTBA-TIAC’s case studies for details on previous state gas tax increases, and visit the ‘State Legislation’ page for information on what other states are doing in 2017 to increase transportation funding. Read a summary of the other state gas tax increases legislatively approved this year below.
Legislation to gradually increase Montana’s motor fuel tax was approved by the legislature on April 22 and sent to Gov. Steve Bullock’s (R) desk for final approval. Accompanied by bills that include a new electric vehicle fee, a 3 percent increase on vehicle registrations and a new tax on vehicles worth over $150,000, the measures are expected to generate over $40 million annually.
House Bill (HB) 473 will gradually increase the state gas tax by 6 cents-per-gallon, with a 4.5-cent increase on July 1 and the remaining amount phased in annually by 2023. A state special fuel tax increase of 2 cents-per-gallon will be phased in during the same time period.
Companion measure HB 650 will also impose a 3 percent administrative fee for Department of Motor Vehicle transactions (which would increase to 9.6 percent if Gov. Bullock does not approve HB 473) and a new tax on light vehicles and motor homes valued at over $150,000 – a 1 percent fee on vehicles’ market sale retail price if less than a year old, 0.9 percent if the vehicle is between one to two years old, and 0.8 percent if the vehicle is two to three years old.
Additionally, HB 205 imposes a $95 annual registration fee for electric vehicles, as well as increases motor fuel tax rates on compressed natural gas (CNG) and liquefied petroleum gas (LPG) to rates comparable to the state gasoline and diesel tax rates.
The motor fuel tax increase is expected to generate $31.6 million annually in new road funding, with an estimated $9 million additional revenue generated by the fees in HB 650 and HB 205.
HB 473 originally proposed an 8 cents-per-gallon gas tax increase. The original version was approved by the House with a vote of 54-46 on March 29. The Senate amended the bill to lower the gas tax increase and returned it to the House on April 13 with a vote of 28-22. The House approved the measure with bipartisan support 57-43 on April 22 and sent it to Gov. Bullock. The governor had supported the original bill, but has made no statements on its amended form.
If Gov. Bullock approves HB 473, this will be the first state gas tax increase since 1994.
Montana is the third state to legislatively increase its gas tax in 2017, and the 20th state since 2013. Read ARTBA-TIAC’s case studies for details on previous state gas tax increases, and visit the ‘State Legislation’ page for information on what other states are doing in 2017 to increase transportation funding. Follow the links below for information on the other state gas tax increases approved by legislatures in 2017.
Indiana lawmakers on April 21 approved legislation that will provide $1.2 billion annually in new transportation funding beginning in 2024.
House Bill 1002 will:
- Increase state motor fuel taxes by 10 cents-per-gallon (effective July 1, 2017) indexed to inflation for the next seven years (capped at a 1 cent increase per year);
- Gradually shift the entire sales tax on gasoline from the General Fund to the State Highway Fund, beginning in 2020 (currently, only 14.286 percent is deposited into the motor vehicle highway account and 85.714 percent is deposited into the General Fund);
- Create a new $15 annual vehicle fee;
- Institute a $150 annual fee for electric vehicles and $50 for hybrid vehicles;
- Permit the Indiana Department of Transportation to study tolling as a possible future revenue source, and submit a waiver asking the federal government to allow the state to approve tolling.
The bill, which includes the first state gas tax increase since 2003 (legislatively approved in 2002), was proposed by Indiana House Republicans on Jan. 4 and originally passed the House 61-36 on Feb. 16. The Senate voted 34-13 on April 4 to advance an amended version of the legislature’s transportation funding plan, which added a cigarette tax (a proposal Gov. Eric Holcomb (R ) strongly opposed), phased out a moratorium on corporate income taxes, and required Indiana businesses and workers get priority on projects. The House and Senate called a conference committee to negotiate a compromise on the bill, and an agreement was announced April 19. On April 21 the House voted 69-29 to approve the measure, followed by the Senate shortly after midnight on April 22 with a vote of 37-12 for final approval.
The bill now goes to Gov. Holcomb, who had highlighted transportation infrastructure improvements as one of the five pillars of his 2017 legislative agenda. Upon announcement of the compromise the governor stated, “I congratulate state lawmakers—particularly House Speaker Bosma, Senate President Pro Tem Long, state Reps. Soliday and Brown, and state Sens. Kenley and Crider—for their plan that will strengthen our global reputation as the “Crossroads of America.” This plan provides the tools necessary to maintain what we have, finish what we started, and invest in the future.”
Upon passage of HB 1002, bill sponsor Rep. Ed Soliday’s (R-Valparaiso) said, “We have a responsible 20-year plan that supports safe roads and bridges and gives a lot more money for local infrastructure. This comprehensive legislation is backed by years of data, providing a historic investment for state and local infrastructure without creating unnecessary debt. This measure is based on compromise and a lot of people working as a team to produce the largest investment in Hoosier history that will have countless positive benefits for our economy for decades to come.”
Update: Gov. Holcomb signed HB 1002 into law on April 27.
- Indiana House and Senate leaders reported on April 19 that they had reached a deal to provide long-term transportation funding, including a 10 cents-per-gallon motor fuel tax increase (indexed to inflation for the next seven years, with a cap of 1 cent increase per year), a new vehicle registration fee, a $50 hybrid vehicle registration fee and $150 electric vehicle registration fee, and a gradual shift of the sales tax on gasoline purchases from the General Fund to the transportation fund. Both chambers will likely vote on the bill April 21.
- Oregon state Sen. Lee Beyer (D- District 6) and Rep. Cliff Bentz (R- District 60), members of the legislature’s joint committee on transportation preservation and modernization, anticipate the committee will introduce a transportation funding proposal in May.
Progress on Pending Bills
- The Tennessee House and Senate both voted on April 19 to approve the IMPROVE Act, which will increase the state gas, diesel, and alternative fuels tax, as well as vehicle registration fees. The bill will also create a new $100 annual fee for electric vehicles and permit local privilege taxes. The House passed the bill earlier in the day and sent it to the Senate, where it was amended to increase property tax relief for disabled veterans and sent back to the House for final approval. The IMPROVE Act is up for vote again in the House on April 24.
- South Carolina Senate lawmakers spent nearly seven hours on April 19 debating a bill to increase the state gas tax. They narrowly rejected amendments to the bill that would have included income tax reform and designating the state department of transportation a Cabinet position. The House had previously approved the legislation on March 1. The Senate did not hold a final vote on the bill this week, but Senate President Pro Tempore Hugh Leatherman (R- District 31) told lawmakers that they should be prepared to vote next week. Nine days remain in South Carolina’s legislative session.
- The Minnesota House and Senate entered a conference committee on April 19 to find a compromise between two proposals that would redirect taxes and fees on auto repairs, auto rentals, the Motor Vehicle Lease Sales Tax, and some taxes on auto parts, as well as dedicate a portion of the state surplus, to fund transportation priorities.
- Colorado bills to increase transportation funding have stalled in committees, lacking enough of the committee members’ support to advance to their chambers’ floors.
- An Alabama bill to increase the state gas tax was pulled from the House floor before a scheduled vote on April 13 after House Speaker Mac McCutcheon (R- District 25) found that the bill did not have enough votes to pass.
- The Missouri House voted 51-103 to reject an amendment to House Bill (HB) 694 that would have asked voters to increase the state gas tax by 5.9 cents-per-gallon. HB 694, which would permit the state to tax propane-fueled vehicles, passed in its original form with a vote of 121-26 on April 18 and was sent to the Senate.