Let’s start with the good news. There's a growing recognition among even the most virulently anti-tax lawmakers that one core area of government is actually underfunded and needs revenues: transportation maintenance and construction.
Unfortunately, there’s some bad news, too. Rather than fixing the gas tax shortcomings that have led to transportation coffers (quite predictably) running dry, many of those same lawmakers want to divert money away from education, health care, and other services, and spend it on roads and bridges instead.
One lawmaker touting this approach is Iowa Governor Terry Branstad. While Branstad should be praised for realizing that the gas tax should be raised next year, his broader plan to couple that increase with big cuts in income taxes and local property taxes completely misses the mark. If enacted, everything from schools to police departments will have to be scaled back just so that Branstad can avoid the “tax raiser” label some political operatives might pin on him for favoring a long-overdue and much-needed gas tax hike.
Governor Branstad's approach echoes one outlined earlier this year by his counterpart in Virginia, Governor Bob McDonnell. During a conversation with the Associated Press (AP), McDonnell hinted that he might reverse his opposition to raising the gas tax if it’s done as part of a broader, revenue-neutral tax “reform” package. As we explained then, however:
“Even if McDonnell believed the state’s gas tax needs to be raised and indexed, his opposition to raising any new revenue overall is almost guaranteed make his reform agenda bad for the state. That’s because every dollar in new revenue McDonnell might generate for transportation would have to be offset with a dollar in tax cuts elsewhere in the budget—presumably from a tax that funds education, human services, public safety, and other core government functions.”
These proposals to actually increase the gas tax might seem remarkable at first, coming from governors who are as opposed to taxes as Branstad and McDonnell. But when you peel away the layers, the logic behind the proposals is nothing new. In the face of lagging gas tax revenues, politicians have frequently raided other revenue streams in order to avoid raising taxes but still keep their transportation systems afloat. Nebraska, Utah, and Wisconsin did it in 2011, and Michigan, Oklahoma and the federal government did it in 2012. At their core, Branstad and McDonnell’s approaches are just accomplishing the same outcome but in a more roundabout way: shifting money around in a way that benefits roads at the expense of everything else.