Tuesday, February 17, 2015

Governor Mark Dayton’s Gas Tax proposal

For the past month, Governor Mark Dayton has been highlighting his plan to add $6 billion dollars for transportation funding over the next 10 years by proposing a 6.5% wholesale gas tax. The gas tax would have floor of $2.50 per gallon, which equates to about 16 cents per gallon of additional tax. There would be no ceiling, so as the price per gallon increased so would the tax.

Dayton recently outlined 600 road and bridge projects that his transportation bill would fund, in which 72% of the projects are in Greater Minnesota while 28% are in the metro. These include 2,200 miles of state road and 330 bridges.

Currently the Minnesota stands at 28.5 cents. The gas tax remained stagnant at 20 cents per gallon from 1988 to 2008. In 2008, Minnesota started phasing in a 5 cents increase in the gas tax along 3.5 cent debt service charge. The 8.5 cent total rise was phased in over a four year period starting July 1st, 2008 until July 1st, 2012.

Gas taxes are mostly viewed as an equitable way to fund transportation since the people that use the roads the most would be paying the most. Additional gas taxes are also easily implemented since they already exist, so it administratively feasible. However, politically it will be a tough sell since this will noticeable tax, especially with the heavy media coverage. Also, Republicans control the House which adds to the difficulty of pass this transportation budget.

A drawback, however, would be that lower-income people who drive a long way to work (specifically rural areas in Greater Minnesota) would be paying a disproportionate amount of their income to the gas tax. Also, policy makers need to take into account the rise in more fuel efficient and electric cars. These cars will be using the roads and bridges but paying relatively little in the ways of a gas tax.  

On a related note, Humphrey Professor, Jay Kiedrowski wrote an op-ed for MinnPost on Feb 9th, 2015 where he agreed that it was time for Minnesota to raise their gas tax in order to repair roads and bridges and relieve congestion in the metro.

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