State Lawmakers Should Pump The Brakes On Gas Tax Hikes

Damien Salamacha Policy Analyst, Americans for Prosperity
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While most Americans are breathing a long-overdue sigh of relief thanks to the recent drop in gas prices, politicians across the country seem determined to restore pain at the pump by increasing the gas tax. In fact, battles over hiking fuel taxes are underway across the country, in Iowa, South Dakota, South Carolina, Texas, and Wisconsin, just to name a few.

No one begrudges efforts by policymakers to address transportation infrastructure needs. But before they consider tax hikes, legislators should examine what is driving up transportation project costs and causing shortfalls in their highway budgets to begin with. Moreover, policymakers should also take steps to ensure that existing taxes and fees are being spent efficiently.

One factor contributing to higher costs of transportation projects are state laws modeled after the National Environmental Policy Act of 1969 (NEPA). Currently, sixteen states have laws similar to NEPA, which require that the potential environmental impacts of proposed projects – like highway projects – are considered prior to construction. While these requirements are well-intentioned, many of these laws have become overly burdensome and costly. Complying with these laws require tremendous resources in the form of time, money, and technical expertise.

According to one analysis by the non-partisan Government Accountability Office, planning and environmental reviews can take between four and ten years for a single highway project. States should consider reforming and streamlining these burdensome and duplicative study and permitting mandates that contribute to delays and higher infrastructure costs.

Prevailing wage laws also drive up costs associated with publicly-funded projects such as roads and bridges. These laws mandate inflated wages by an average of 22 percent and slow down the construction of projects due to excessive paperwork and bureaucratic requirements. Thirty-two states currently have prevailing wage legislation. Repealing these laws outright would eliminate unnecessary and costly regulatory barriers, helping to save taxpayers money and speed up completion. Lawmakers in both Indiana and Wisconsin are working to repeal these laws – moves that, if successful, will save taxpayers in their respective states millions of dollars.

Many states also have high administrative costs associated with transportation projects. New Jersey is a state which spends $2.02 million per mile on highways, nearly ten times the average, and $44,388 per mile on administrative costs, which is four times the average. California spends $77,000 on administrative costs, which is over seven times the average. Money spent on paperwork and red tape is money that is not spent on filling potholes, repairing bridges, and improving infrastructure.

Besides state policies that drive up costs, politicians and bureaucrats often fail to spend transportation dollars on projects that motorists and taxpayers would like them to. Worse, many states divert these funds away from transportation and into the general fund to cover budget shortfalls and pay for unrelated spending. For example, Delaware Governor Jack Markell has proposed transferring $40 million out of his state transportation trust fund to cover general fund expenses for two years in a row. States should use revenue generated through transportation taxes and fees for transportation, rather than spending transportation funds elsewhere and asking taxpayers for additional revenue.

Wisconsin has put an end to this practice through voters approving a legislatively-referred constitutional amendment requiring that revenue generated by transportation fees and taxes be deposited into the state’s transportation fund. This amendment guarantees that revenue generated through transportation-related levies, such as the gas tax and vehicle registration fee, will be allocated to transportation-related projects only. Other states should follow Wisconsin’s lead.

The bottom line is states are burdened by laws and bureaucracy that drive up costs – from prevailing wage requirements to unreasonable environmental review processes. States should emphasize saving money rather than increasing their taxes to pay for transportation infrastructure.

Damien Salamacha is a member of the Policy team at Americans for Prosperity.