Gas Tax: There Are Solutions, and Then There are SOLUTIONS



gas-taxAs expected, the gas tax debate has escalated and the camps have been established.  The most vocal is the camp that says, “NO MORE TAXES.”  They’ll argue to their dying breath that the problem can be solved simply by cutting waste in the Iowa Department of Transportation.  Of course they can’t even tell you how much IDOT spends, how much of that budget funds the administration of IDOT and how much goes to actual road/bridge construction.  But, deteriorating roads be damned, “it’s mismanagement that’s the problem,” they’ll whine.

Then there are the two camps that agree there is a funding shortfall that needs to be addressed.  From there the camps diverge, at least it terms of how the shortfall should be funded.  Of course there’s the camp that is promoting a long term fix to the issue by risking reelection and supporting an increase in gas taxes.  The other camp feels that the current budget surplus should be used to solve the problem.

I just read an email from Iowans for Tax Relief (ITR).  In their missive, “Gas Tax Proposal in the Works,” they make clear they’re in the “use the general fund to solve the funding shortfall” camp. ITR starts with, “Proposing a tax increase of any kind is dangerous and unnecessary with Iowa’s current fiscal condition and economy.  There is nearly a $1 billion surplus, proving that the taxpayers are over-taxed and the Legislature has plenty of money available to appropriate for agreed priorities.  Furthermore, the price of fuel continues to rise while the taxpayer’s dollar buys fewer groceries at the store.”  As if there’s no danger is spending general fund surpluses for ongoing expenses.

First, ITR makes the mistake of confusing the general fund with the road use tax fund (RUTF).  The sources of revenue for the general fund generally come from income taxes, property taxes, sales taxes and a few other sources.  On the other hand, the RUTF comes from title fees, registration fees and gas taxes and are constitutionally protected for diversion for anything other than the road/bridge program.   While there may be a surplus in the general fund, there is certainly no surplus in the RUTF.  My point here is that, while ITR is correct in that Iowa taxpayers were overtaxed when it comes to income, property and sales taxes, the fact that there is a $215 million shortfall in the RUTF for critical construction needs for roads/bridges, which means that the RUTF is underfunded by a long shot.  So here we are with an organization (ITR) who claims to protect taxpayer’s interests making that claim that it’s OK for the government to siphon our tax dollars out of the general fund to a program that should be self-funding.  In fact, they’re asserting that we, the taxpayers, shouldn’t each receive a $369 tax refund for our 2012 tax over payment so that we won’t have to pay an additional $80/year per vehicle in gas taxes.  Explain to me how that makes sense.

While there may be a surplus in the general fund, that doesn’t mean there is plenty of money available “for agreed priorities” as the ITR would suggest, at least as they relate to roads and bridges.  I would argue that I overpaid my income/property/sales taxes and that I’m entitled to that money back.  Apparently other Republican legislators agree with me because legislation has already been submitted that would refund that money to Iowa taxpayers.  One would have to assume that those who support the tax refund can’t also be in the “use the general fund to solve the road/bridge funding problem camp.”

ITR also fails to mention that, if general funds are used, 100% of those funds will be from Iowa taxpayers.  However, if there’s a gas tax increase, about 18% of those taxes will be paid by non-Iowans.  That is, by truckers and others passing through Iowa that buy their fuel in Iowa.  As a taxpayer, do you want to pay for 100% of Iowa’s roads/bridges when 18% of the wear and tear on our roads/bridges is caused by non-Iowan’s?  Or should non-Iowans pay their fair share of those maintenance and construction costs?

Today, Kraig Paulsen came out publicly in his newsletter stating that “We will not use one time money to fund ongoing expenses.”  Guess that puts a sword in the heart of the idea to use general fund surplus money to fund roads and bridges.  That is, of course, unless the GOP decides that each road and bridge is each a one time cost and not ongoing expenses.  But that’s something the Democrats do, not Republicans, right?

And today we have the IOWA GOP posting a Des Moines Register poll stating that 63% of Iowans are opposed to an increase in the gas tax.  So now the GOP is legislating by poll results?  Did anybody within the Iowa GOP leadership read the poll?  If they had, they’d have found that the only question asked was whether Iowans supported a gas tax or not.  If the Register asked people how their roads and bridges are funded, I’m guessing the vast majority would have no idea that general funds aren’t used.  I bet a lot of them would have no idea how much money the Iowa Department of Transportation spends on roads and bridges annually.  I bet they have no idea about the deteriorating condition of roads and bridges throughout IA.  I bet they have no idea why there is a funding shortfall that includes the ever increasing number of miles of roads in IA.  And they probably have no idea about the increasing number of cars and trucks that cause the wear and tear.  I bet they don’t understand the increase in average mile/gallon for cars that means each car uses less fuel than they did when the gas tax was last increased in 1989.  I bet they have no idea how much buying power has been eroded in those gas tax revenues due to inflation over those years.  But, I guess this isn’t about facts as for as the Iowa GOP leadership is concerned.  It’s about spinning data to make sure that this can is kicked down the road, just like your Federal government continues to kick the debt/deficit problem down the road.

What I’d like to hear from our legislators who oppose the gas tax increase are their solutions to the problem.  But I’m not hearing viable options.  Even if general fund surpluses are used it’s a temporary fix.  And we can cut costs at IDOT but not $215 million per year against a $365 million annual administrative budget.

I hear solutions like the one from Senator Kent Sorenson who acknowledges the funding shortfall, but is insisting that general fund spending first be brought under control and zero based budgeting implemented for government agencies.  I admire Senator Sorenson’s ambition to address spending excesses, I really do, but does he really believe that the general fund spending will be reduced to his satisfaction with a split legislature that includes many moderates within his own party.   In order to achieve his level of acceptable spending and budgeting the majority of the legislature and the governor’s office will have to be like minded Tea Party members.  So, until pigs fly, what do we do about the funding shortfall for roads and bridges?

We’re long on opposition to raising the gas tax but we’re way short on viable alternative solutions.  It’s time for the Iowa legislature to take a stand, make the hard decisions, and put in place a long term solution to ensure that Iowa’s roads and bridges are safe and contribute to our growing economy.  And until another viable solution is found, the only solution on the table right now that fixes the problem is to increase the gas tax.

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  • http://shanevanderhart.com/ Shane Vander Hart

    Scott re. the Iowa GOP posting the gas tax poll…. I’m sure whoever posted it on our Facebook wall did read it (it wasn’t me). However, the state party, does not legislate anything. Promoting a raise in any tax would be contrary to our stated platform so to take any other position would put us in opposition to the grassroots voted on the platform. So not sure what else you’d have us do.

    Also you seem to content that somehow bridge and road repair can’t be partially funded out of the general fund. Why not? Budget a minimum amount accompanied by the appropriate cuts elsewhere in the budget. There’s still plenty that the state does that is should not be doing. Then let the lions share come from the road use tax fund.

    Why is it that you don’t see that as a viable solution instead of raising the gas tax?

    • http://www.facebook.com/scott.bailey.3367 Scott Bailey

      Shane, if the long term fix is to use general funds allocated annually to the road fund, then it won’t be a long term fix. Our state legislature has demonstrated time and again their affection for diversion of funds from one area of the general fund to the other. Check the history of RIIF including it’s original funding target and continual diversions to fix other areas in the state budget, with those diversions rarely reversed in future years. Vertical construction lobbyists have to fight every single year to fund much needed construction in the state, only to fight the same fight every year and coming up short of the original. Try to fix the funding stream for roads and the next legislature will simply use the money to fix some other critical need.

      I think we both agree the general fund spending needs fixing. I’m highly confident that, with Gronstal in charge in the Senate, they’re more interested in reelection than responsible spending that will keep Dem voters home on election night. We can’t afford to hold maintenance of roads/bridges hostage until the GOP takes over the Senate and still manages to retain the House and Governor’s office. In fact, even if they do, I’m fairly confident that history will repeat itself and spending will still be excessive.

  • TimO515

    Why is Sen. Sorenson’s proposal supposed to take a back seat to stubborn Dems & RINO libs not being willing to compromise? It seems like we on the right (especially us pro-lifers) have to make the pragmatic choice and give up our principles. Enough!
    As far as a solution to raising more taxes…how about we eliminate the state income tax before we start talking about raising taxes?! I’m all for a use tax, but only after the very possibility for taxing my income is thoroughly removed. Most people may not understand the way the budgeting works in government, as you say, and I think that’s probably on purpose. We have a budget at my house and when we have to pay an unexpected bill (which this obviously is NOT), we tap our emergency fund (thank you Dave Ramsey!)…if it turns out to be an ongoing expense, we adjust. I suppose I can go to my boss and ask for more money and, if I am worth it, then I just might get it. But generally, we make appropriate cuts elsewhere to make sure we can afford it. I would submit that our “leaders” haven’t earned more of our money. Fix that first! Then come ask me for more…if it’s still necessary.

    • http://www.facebook.com/scott.bailey.3367 Scott Bailey

      As I mentioned in my post, I have no objection to Sen. Sorenson’s goals, nor your ideal of eliminating the income tax. As I also mentioned, that’s not going to happen within the next two session for sure, and probably not the next four. So what do we do until then.
      And a household budget is quite different than a state’s budget in terms of pure dollars, fluctuations in revenues from year to year, deflation, inflation, differing goals among political leaders (I’m guessing it’s easier for you and your wife to agree on priorities than it is among two hundred legislators, a governor and a state supreme court).
      As you astutely point out, in your home you make adjustments based upon your income. What would you do if your income dropped the equivalent of $200 million dollars over that last 20 years. That’s what inflation and increased fuel efficiency has done to RUTF revenues. You’d probably scale down. But, if you have a growing state that needs a growing road system to allowed for continued growth and prosperity, you need to be able to raise funds at a rate faster than inflation and that offsets less gas purchased per driver. Meeting that goal is a lot harder than simply saving up for a new transmission or a new furnace.
      Imagine instead that you have to replace your transmission, your furnace and your roof all at the same time. And imagine that happened because you took a major pay cut at work and you didn’t have enough money to maintain your car and your furnace and make minor repairs to your roof that would have significantly extended their lifespans. Not so simple then even with Dave Ramsey. And, with the deferral of maintenance on our roads and bridges that has occured as a result of the reduced value of RUTF revenues, that is what has happened.
      I’ll say it again, while we’re waiting for pigs to fly and the legislature to get our general fund back into fighting shape, our roads and bridges continue to deteriorate to the point that deferred maintenance will evolve into the requirement to completely replace roads that otherwise would have had many more years of life with far less cost.

  • http://twitter.com/dherik nickberry

    The problem is raising gas taxes directly hurts the middle and lower class. I know if the gas tax is raised it will directly hit my budget 208 a year, that is a month of groceries. Imagine the hit to a company with a fleet of vehicles, and what their additional cost will be. Who will pay for that? The consumer and the employees. Perhaps iDOT needs to scale back their wish list 5 year plan spending $2.3 billion. And start holding their contractors accountable to crappy road construction that fails after 3 years.

    • http://www.facebook.com/scott.bailey.3367 Scott Bailey

      Imagine the cost of not doing anything. I’d be curious as to specifics on crappy road construction that failed after three years. That’s more likely to be patch work on roads that are due for replacement where patches are temporary at best. That’s exactly why the funding shortfall is a problem. Roads get neglected to the point that deferred maintenance results in the need for complete replacement prematurely.