A national study of the 50-states by the Institute on Taxation and Economic Policy advocates an increase in the gas tax for Iowa and several other states. Senior analyst Carl Davis says the survey found Iowa and other states are losing over 10-billion dollars in transportation revenue every year.
“Iowa has a similar problem that a lot of other states have, is that they levy the tax at a fixed rate so it doesn’t grow over time, despite the fact that asphalt, concrete and even labor, all the things that go into a transportation network become more expensive every year,” Davis says.
He says the value of Iowa’s tax has actually eroded from what it was the last time the tax was raised 22 years ago. The issue has gotten a lot of debate in Iowa as a task force appointed by the governor recommended a gas tax increase of up to 10 cents, but the governor quickly rejected the idea, saying the time is not right to raise the tax.
Davis says tax increases are tough for legislators to sell right now, but he says the public has to look at the costs of not repairing roads. “The American Society of Civil Engineers estimates that there’s a 130-billion dollar drain on the economy in terms of higher vehicle repair costs and travel time delays coming from the fact that transportation isn’t being adequately funded. There’s also safety issues as well.”
Davis says the report from his institute has raising the gas tax as its top recommendation for Iowa. The second would be to index the gas tax to the prices of gas, something that’s done in 14 other states. “This isn’t really a political issue, you see more conservative states like Georgia, North Carolina, Nebraska, they (index the gas tax) but so do states like New York and California, which tend to be on the more progressive end of things. So, it’s a group of very geographically and politically diverse states,” Davis says.
“It’s not really a partisan issue and I think a lot of the business backing that you seen for a gas tax increase in Iowa makes that clear as well.” Davis says the report does have a third recommendation that addresses some of the concern over the impact of a gas tax increase.
Davis says they ran some numbers through their tax model and found that “low income drivers pay significantly more of their budgets in state and local gas taxes than high income drivers.” He says some have used the income difference as a reason to not raise the tax at all, or to cut it.
But he says the institute believes a better solution is to provide more income tax relief to low income drivers and keep the gas tax as a consistent revenue stream for funding transportation. You can see the complete report on the gas tax at: www.itepnet.org.