January 2015 Brief: Volume 22, Number 3
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Don’t Raise the Gas Tax!
by Dr. Don Racheter
Did you think some of the “attack ads” run during the past general election were mean, nasty, and full of falsehoods? Well have you seen the spots recently run on television by the “Iowa Good Roads Association” (composed of the self-interested Associated General Contractors who build our roads, the Iowa Motor Truck Association which uses them, and the Farm Bureau who are concerned about rural farm-to-market roads and bridges) which suggest that all of our children and grandchildren who ride school buses in Iowa are in danger of dying in a crash of a school bus going over a “deficient bridge?” As Craig Robinson put it, “This outrageous ad makes all those negative ads in the U.S. Senate race look like child’s play.”
Don’t let the facts stand in the way of a good scare – whatever it takes to get taxes increased to spend more on pet projects! As KCCI TV reported on this issue:
And even if these tax-eaters manage to scare Iowa Legislators into raising the gas tax, it won’t really fix the problem they claim to be concerned about, the approximately 80 percent of roads and bridges that are “deficient” in our rural areas. As Public Interest Institute demonstrated in a FACT SHEET in January 2015, the proposed ten cent per gallon tax increase “would result in a 52 percent increase in the fuel tax to the consumer, but only yields a 22 percent increase in the funding available for farm-to-market roads in Iowa, due to the formulas used by the IDOT to allocate fuel tax revenue to cities and counties, and to farm-to-market roads.” Unless the formula is repealed, changed, or suspended, there won’t be enough funds even with the tax increase to actually fix the problem.
The allocation of road-use funds in Iowa has been governed by a formula adopted in 1949 (last amended in 1989) which directs 47.5 percent to primary roads, 24.5 percent to secondary roads, 8 percent to farm-to-market roads, and 20 percent for city streets. Additional funds for maintenance and construction of Iowa roads and bridges comes from the Transportation Investment Moves the Economy in the 21st Century (TIME-21) fund created by the Iowa General Assembly in 2008 by changing vehicle registration fees and schedules and by increasing trailer and title fees. TIME-21 is allocated to primary highways (60 percent), secondary roads (20 percent), and municipal streets (20 percent). “For state fiscal year 2013, receipts into the RUTF and the TIME-21 Fund are estimated to be $1.30 billion, comprised of $440 million in fuel taxes, $780 million in various registration fees, plus $80 million from miscellaneous other sources.”
So what about some “outside the box” thinking to address the issue? Governor Branstad has just been re-elected to a historic sixth term, carrying all but one of Iowa’s 99 counties, thereby gaining a good deal of “political capital.” Further, Governor Branstad has indicated addressing the need for repairing defective roads and bridges will be a high priority for him in 2015, and that he is open to discussion of all ideas for generating the needed revenues to do so. Branstad doesn’t have enough political capital to repeal or change the road-use formula, but what about championing a two-year moratorium on its application? Put the $2,600,000,000.00 of road and bridge construction and maintenance funds for the two years into one big pot, and then have the road engineers (not the politicians!) make a list of all the dangerous roads and bridges that need to be fixed based on existing condition, utilization, and cost of repair or replacement. Then start at the top and work down until the funds are gone.
Yes, this would mean some “nice but not necessary to prevent deaths” projects in our cities might be put off for a couple of years, but then the formula would kick back in and we could return to “business as usual.” As it is, the government workers in the road building and maintenance portions of our state and local governments have incentives to “spend all the money and ask for more” instead of incentives to re-allocate funds from lower to higher priority projects if they are “outside their silo.” If we put all the money into one “silo” or pot for two years, it would allow us to see if we are actually short $225,000,000 as some have claimed, or if this is an artificial shortage generated by the operation of the formula.
If at that point it is clear we need to raise taxes to fix the problem, so be it. But raising taxes should be the last resort, not the first, when public problems emerge. And we should not be stampeded into tax increases by false, misleading, and self-serving scare ads by those who would directly benefit from the increased governmental spending!
Dr. Don Racheter is President of Public Interest Institute, Mount Pleasant, Iowa. Contact him at Public.Interest.Institute@LimitedGovernment.org.
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