Iowans for Tax Relief’s Solution to the Road and Bridge Funding Problem? Not So Much


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energy-american-pumping-691033-hThe lobbying group, Iowans for Tax Relief (ITR) is at it again.  They’re trying to convince taxpayers that a gas tax doesn’t make sense.  They respond to the pro gas tax reasons with reasons why it doesn’t make sense, albeit weak reasons in my opinion.  But, that’s it.  They’re opposed to the gas tax but offer no alternative solutions. They don’t mention whether or not they acknowledge there’s a funding problem.  Personally, I expect much more from an organization like ITR.

ITR provides rebuttals to five reasons legislators are supporting an increase in the gas tax.  If I may, I’ll rebut the rebuttals as they laid them out in their article.  The numbered items in bold are the positions taken by the pro gas tax lobby as stated by ITR in their article:

1. “The Fuel Tax is the most equitable form of tax in Iowa as it is truly a user fee.  If you don’t drive you don’t pay the tax.”

ITR argues that a gas tax is unsustainable and unreliable source of revenue because car makers are producing ever more efficient cars.  Since the last fuel tax increase, we’ve seen an increase in average fuel mileage and that trend will certainly continue.  ITR is correct, it is unsustainable.  And I’ll acknowledge that an increase in gas taxes is the worst option…except for all of the others.  But, I ask you ITR, what is a better solution that you would consider sustainable and reliable and isn’t a tax/user fee?

ITR does astutely argues that trucks cause more wear and tear on the Iowa roads than cars.  They further add, :” A true user fee would capture more revenue from those that do the most damage to Iowa’s roads and not penalize all drivers with the same tax rate. “ You know what?  They’re absolutely right.  Trucks should pay more than cars.  And you know what?  They do.  You see, cars get much better gas mileage than trucks so trucks use a lot more fuel.  As a result, they pay a lot more in gas taxes.  That’s exactly how a user fee, the one ITR is criticizing, is designed to work.  So, ITR, if you object to the gas tax as a user fee, what’s your alternative solution that would be more equitable than that as you define it?

2. “20% of the fuel tax is collected from out-of-state drivers.”

ITR is pretty clever.  They noticed that 20% of the fuel tax collected is from out of state drivers but only 13% of RUTF money comes from out of state drivers.  Well knock me over with a feather.  But, so what?  Some of the RUTF revenues come from sources other than gas taxes including title and registration fees.  So your best rebuttal is comparing apples and oranges?  Is ITR now proposing that we start charging out of state drivers registration and title fees to use Iowa roads to fix their alleged imbalance?  Probably not.  But if you find this objectionable, what is your solution?

ITR further points out that there is “no guarantee” that out of state drivers will buy gas in Iowa once the gas tax goes up.  You know what.  I learned at an early age that there are no guarantees in life.  And if legislation ever, ever depends upon guarantees by your legislators, run for the nearest exit.  ITR is right.  There are no guarantees, but there is common sense.  It’s unlikely that Iowa drivers will flock across the border to avoid the initial $.03/gallon tax increase and people don’t drive several miles to avoid $.10/gallon in taxes when doing so will cost more than the savings.  And we know for sure that won’t happen on the IL border since gas is already much higher than $.10/gallon more there.

But you know what ITR is proposing as a more equitable solution to address their objections?  Me neither.  Because they haven’t offered any alternatives.  Apparently they can’t think of any other means for which out of state drivers can pay “their fair share.”

3. “The funding formula ensures equitable distribution.”

ITR objects to the current funding formula.  They propose that the funding formula be adjusted.  Again.  You see, that topic was visited by our legislature in recent years to come up with the current funding formula.  I may be in support of the gas tax increase, but I’m not opposed to revisiting the funding formula as part of the solution.  So, I wonder if this is included just to get to five reasons to oppose the gas tax, or if ITR would be willing to reconsider their opposition to raising the gas tax if this component becomes part of the discussion.  But, again, we really don’t know because ITR doesn’t tell us under what conditions they would support increased road funding, if any.

4. “This is an economic development issue.  What business would want to move to Iowa if our infrastructure is falling apart?”

Again, ITR is spot on when pointing out that Iowa has the highest “TOP CORPORATE INCOME TAX RATE” in the country.  At the risk of overusing the phrase, so what?  If our corporate taxes are too high, and they are, lobby to fix the corporate tax rate.  But don’t use excessive income taxes as an excuse to oppose the gas tax.  Again, that’s an apples and oranges argument.  Even with the proposed gas tax increase the cost of fuel in the Midwest is among the lowest in the country, including IL which has a much higher fuel tax than Iowa.  If the true problem of excessive commercial property and corporate income taxes are addressed, as they should be, the gas tax will be incidental to a company’s decision to relocate to Iowa.  The fact that Iowa recently attracted two major, billion dollar plus fertilizer plants to Iowa, even with the fuel tax discussion already on the table, suggests that ITR’s argument is moot.

If ITR wants to address the economic impact of infrastructure, they should do their homework.  The Federal Highway Administration documented in 2007 that every $1 billion spent on highway investment:

  • Creates or supports almost 28,000 jobs, with many of those jobs immediate.
  • Creates 30 cents of “cost saving” producer benefits annually.  If good infrastructure attracts business, what’s the cost to a state with poor infrastructure?
  • On average 25% of yearly productivity growth rate in the US is due to highway investments.  (It makes great sense to build roads to increase GDP)

So, in spite of the facts to the contrary, ITR continues to oppose gas taxes on economic grounds.  Their solutions?  None so far.

5. “This tax increase will be a minor cost for the average Iowan.  If you raise the fuel tax 10 cents and the average Iowan’s car puts on 15,000 miles at approximately 21 mpg, this costs $68 a year.  You can’t even have a broken shock replaced for $68.”

ITR is starting to sound like liberals on this one.  “The gas tax is regressive.”  “The gas tax will hurt the poor.” “It’s unfair.”  “Why tax minimum wage earners $68 more per year when they already pay gas taxes and vehicle registrations?”  And again, they’re right.  But using emotion rather than common sense should be left to the liberals.  Yes, it is expensive to own and drive a car.  And it costs a lot to build and maintain roads and bridges.  But, again, is there a more equitable way to fund roads and bridges?  Would ITR prefer income redistribution and have the “rich” pay more than the poor, the middle class and the minimum wage earners they reference, even though the “rich” don’t use the roads any more than the poor and working class?  Probably not, but as I said earlier in this post, the gas tax is admittedly the worst way to fund roads and bridges, except for all of the others.  Yes, it is regressive and it will cost proportionately more for lower income earners to buy gas.  But, is there a better alternative out there that doesn’t involve the rich paying for the poor?  If there is, I’m yet to hear it.

ITR has tried to dispense with pro gas tax arguments as being flawed.  I think their arguments are quite flawed in themselves.  Worse, they seek only to oppose and offer no alternative solutions.  And they don’t state whether or not they agree with the Governor’s CAC Transportation 2020 Report in terms of critical needs and a funding shortfall.  If there are unfunded needs to be met, then ITR should stand up and take a stand on how they propose the fix the problem.  Otherwise they’re merely being obstructionist.

Before I close this one out I’d like to take this opportunity to offer a shout out to Shane Vander Hart who publishes Caffeinated Thoughts.  I know he disagrees with my overall position on the gas tax yet he’s willing to offer his blog site to post opposing views.  Thanks Shane!

As a final note, I was chastised recently by a reader for my failure to disclose my ties to the road and bridge industry in my prior blog post.  I’d done so in my first blog post on this topic but not my last post.  The claim that I’d failed to disclose my association to the industry is also not entirely accurate, since my author profile (included in both my prior posts) states clearly my involvement in the surety industry.  As for my failure to disclose my ties directly within my post, guilty as charged.  I am a surety bond underwriter for a company that provides surety bonds for construction projects, including roads and bridges.  While my company could benefit from a gas tax increase I personally stand to gain little, if any, from an increase in the IA gas tax. My position involves overseeing business in all 50 states and I’ve made no comments whatsoever in any of the other 49 states, pro or con on pending road funding issues. Regardless of whether or not IA increases their gas taxes, my compensation will probably be affected by $0. My employer has offered no feedback on my positions on the IA gas tax.  Also, to clarify further, I’m an employee, not a shareholder. My employer is a mutual owned by the policy holders, not shareholders.

If I were motivated by additional compensation for growth I’d be advocating for higher funding in every state and increased Federal spending on transportation.  I’ve made it clear in prior posts my support of cutting Federal involvement in transportation.  In the near term that would dramatically cut funding available for construction as states regrouped and came up with alternative sources of funding.  Further, others have suggested using general fund sources which would ramp up spending in 2014 more than year one of a phased implementation of a gas tax increase.  I’ve opposed using general funds.  Again, either way, my compensation remains unchanged.  My motivation is as a taxpayer who has researched the topic extensively as a result of my knowledge gleaned on the subject after 29 years in the industry, of which the last 13 have been here in Iowa.

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