States look at hiking gas tax as fuel prices plunge

With gas prices dipping to their lowest level in years, lawmakers in state capitals throughout the USA are increasingly open to the idea of raising fuel taxes to help rebuild crumbling roadways and bridges.

The movement at the state level comes as House Speaker John Boehner, R-Ohio, said last week that he's doubtful that there will be enough backing for a bi-partisan push to raise the federal gas tax, which has stood at 18.4 cents per gallon since 1993.

The Obama administration has also declined to endorse raising the federal gas tax to finance road funding, but says it will take a look at anything Congress comes up with.

State legislators and governors, however, aren't waiting for Washington.

Republican leaders who typically find talk of raising taxes a non-starter are making the issue a priority in 2015, even though polling consistently has shown broad opposition among Americans to fuel tax hikes.

"The states have shown that they are more likely to act on the gas tax than the federal government is," said Carl Davis, a senior policy analyst at the Institute on Taxation and Economic Policy, a research group in Washington. "The states have to balance their budgets. If they see, their roads are in bad shape or their bridges are literally falling down—in some cases—they need to come up with a way to pay to improve that. And there's a limited number of things you can do at the state level."

The increased chatter in state capitals about raising fuel taxes comes after eight states (Maryland, Massachusetts, New Hampshire, Pennsylvania, Rhode Island, Vermont, Virginia, and Wyoming) have done just that over the last two years.

South Dakota Gov. Dennis Daugaard noted in his State of State speech on Tuesday that when South Dakota last raised its fuel tax 16 years ago, the price of gasoline hovered around $1 per gallon, and about 22% of that went toward state fuel tax. The average price for regular unleaded gas in South Dakota is $1.99 per gallon, and the national average is $2.08.

Meanwhile, the price of road construction has ballooned. In 2003, the state could get buy about 7.8 miles of asphalt overlay for $1 million. In 2013, that same amount of money could pay for 4.5 miles of asphalt overlay.

"Our state highway system is the state's most valuable physical asset and if we want to maintain it, we must act now," said Daugaard, a Republican, who proposed raising the fuel tax by 2 cents per gallon in 2015 and an additional 2 cents each year going forward.

In Iowa, Republican Gov. Terry Branstad and Iowa lawmakers have tossed around raising the 22 cents per gallon fuel tax—which has remain unchanged since 1989—or potentially allowing voters in each county to vote for a 1% sales tax. The increased revenue would stay in the counties that levy such taxes to be used on road improvements.

"I think Iowans like the idea of having some say on this," Branstad told reporters last week.

Republican leaders in Utah's legislature have also signaled they will take a look at the state's gas tax, which hasn't been raised since 1998, as they try to grapple with a transportation funding shortfall there.

In Louisiana, the state's Transportation Funding Task Force has forwarded a number of ideas to lawmakers. Louisiana has a backlog of $12 billion in road repairs. Among the ideas are to replace the state gas tax with a sales tax on all fuels, direct more money in the construction budget to road work, and steer dollars to highways that would end up in the state's "rainy day" fund.

The intense debate on the gas tax in New Jersey could have ramifications for Gov. Chris Christie's potential 2016 White House bid. A Garden State trust fund that pays for road and bridge repair is on the verge of bankruptcy, and some lawmakers in Trenton are pushing for an increase in the state's gas tax to replenish it.

Going along with that idea is a tricky proposition for Christie, who could find himself trying to show his conservative bonafides with Republican donors and primary voters, many who see any increase in taxes as toxic.

The idea of raising the state gas tax is also unpopular with New Jersey motorists, who enjoy one the lowest gas taxes in the country. Fifty-six percent of residents said they oppose a raise in the state's gas tax, compared to 41% who support it, according to a Rutgers-Eagleton poll published in December.

One proposal that's been floated by Democratic Assemblyman John Wisniewski would increase the state gas tax by 25 cents per gallon, costing the average New Jersey motorist about $292 more per year.

Christie did not address the gas tax or transportation funding issues in his much-anticipated State of the State address on Tuesday.

In Georgia, lawmakers are taking a hard look at the state's 4% sales tax and the 7.5 cents per gallon excise tax as traffic congestion has become a bigger problem for the state.

A study committee recently found that the state needs to raise at least $1 billion more a year to repair bridges and roads in the Peach State.

Michigan is taking a different tact. The GOP-controlled legislature there approved a plan last month for a ballot initiative to boost the sales tax to help pay for road repairs.

Michigan Gov. Rick Snyder signed legislation on Monday to spend $1.3 billion a year more to fix roads and other transportation infrastructure, but it's contingent on Michigan voters increasing the state sales tax from 6% to 7% in the May 5 ballot initiative.

Meanwhile, in Tennessee, Republican Gov. Bill Haslam has warned that the state has to do something soon to deal with its crumbling infrastructure. The gas tax hasn't been raised there in nearly 26 years.

"At some point and time soon…I think there will be a bill about gas tax," Haslam recently told The Tennessean editorial board . "It's incumbent upon us as the administration to show here's what we would do with that money if you increased the fuel tax, and then it's also I think important for all of us not to just increase it so that ... three years from now we're back in the same position."