April 23, 2014

DOT circulating tax ideas to key legislators, highway construction industry

Ending a tax break on the diesel fuel farmers and construction companies use in off-road vehicles is among the ideas the Iowa DOT’s director has developed for increasing the state budget for road construction and maintenence.  Governor Terry Branstad today said some of the options are “outside the box.”

“They’re different and we would expect that some of them would be somewhat controversial,” Branstad told reporters during his weekly news conference. “We are saying, ‘Let’s see how the public feels about it.’”

However, the Iowa DOT’s director isn’t releasing his list to the public, but instead sharing it first with legislators and interest groups, like the highway construction industry.

“I think this is a good process,” Branstad said, “and I’ve indicated I’m not endorsing any of these options, but my hope is we can look at all these different options and alternatives and see if a consensus can be built that would eventually gain bipartisan support in the legislature, both the House and the Senate, to address the issue of funding fot the Road Use Tax Fund.”

Diesel fuel sold with a red dye is to be used in off-road vehicles like tractors and excavators. It is not subject to state taxes, an estimated $38 million annual tax break for farmers and the construction industry. The DOT director’s list suggests that money could be placed in a new account to finance road projects in rural areas of the state.

The only other idea on the DOT’s list that would bring in more tax money would be increasing the state sales tax on vehicle purchases — meaning car and truck buyers would pay $60 million more dollars in registration fees.

State officials say motorists are buying less gas, mostly because of improved fuel-efficiency,  and the state isn’t collecting enough in fuel taxes to keep up with road and bridge maintenance.