The Associated Press has a story on HB 1001 introduced by Rep. Soliday which was heard by the House Roads and Transportation Committee and passed by a vote of 8 to 5 as amended. I don’t know what the committee amendment said. The story says that it would raise additional road funding by increasing the State’s cigarette tax by a dollar per pack and raise the state’s gas tax from 18 cents per gallon to 22 cents per gallon. It also gives local governments the discretion to raise certain taxes to fund local projects.
This is at odds with Gov. Pence’s plan which is to come up with $480 million through a combination of borrowing and spending a chunk of the State’s reserves.
Gov. Pence’s ideological commitment to not raise taxes is misplaced here — particularly if one is committed to a use tax model of paying for roads. I’m not necessarily convinced it’s the best model, but we like the gas tax because it’s a proxy for road use. If you use the road more, you pay more in taxes to support the road. It definitely has an appeal. (I think that sound infrastructure has indirect economic benefits to people other than those who are actually on the roads — but that’s probably a battle for a different post.)
We are not currently keeping up with the wear and tear on our roads. In other words, we are using more of our roads than we are paying for. So, it makes sense to raise taxes to a level that matches our use of the roads. What we pay in taxes for our roads is chump change compared to the value we get out of having good roads. With gas prices low, this is the time to raise the gas tax. Gas prices are down a dollar or more from levels we found sustainable. As variable as gas prices are, four cents is not going to be noticeable to most Hoosiers. (I’m not a fan of smoking and, personally, find the habit disagreeable, but the cigarette tax strikes me as an odd choice for funding roads. Just raise gas taxes or something road-related to wherever they need to be to sustain road maintenance.)
I thought the increase in cigarette taxes was originally to go into the general fund to replace the gas taxes being redirected from the general fund towards road spending. Did that change in the latest version of the bill?
As far as Pence, well, Grover Norquist and his tax pledge are killing America.
I think you are correct. I think I heard on the radio this morning that some portion of the gas tax had been going to Medicaid? funding and that that portion was going to go to roads instead and the cigarette tax would fill the hole left by transferring the gas tax revenue.
Not sure if I got that entirely correct.
I have been following the competing bills. I wonder if Pence’s opposition to the bill is his hope that if he could ever run for president, he could claim he never raised taxes.
You hit the nail dead center. The Gas tax should be raised and the amount necessary to pay for road maintenance only is approximately $0.78/gallon without any new road construction.
We have so complicated and clouded the relation between cost of service and usage that it is no surprise when people think moving deer crossing signs will eliminate car/deer accidents. It is patently absurd to use cigarette taxes to fund roads when the State spends 100’s of times that amount taking care of the destitute that get cancer and have no resources.
Fix the roads and make them pay their own way. Same comment to our Legislators. Face and deal with the real problems or you are not filling your role as a public servant.
Seems many Public Servants have the concept backward. They think the Public is their Servant.
http://www.strongtowns.org/journal/2014/7/24/some-perspective-on-the-gas-tax.html
While I think a gas tax is the quickest way to implement an increase in road revenue, it will more heavily burden those with the least gas efficient vehicles when comparing mile-to-mile. But I do agree with the author that four cents will hardly be noticed.
Add to that, a tax on cigarettes, and it just seems like they are chasing the vices of the poor. Sure, they should quit but obesity can be just as bad a problem. Why not add a hefty tax on soda and junk food… because it sounds just as dumb.
Agree that charges for use of a service should be handled by charges for that service when at all feasible. Raising fees/charges for matters related to use of the roads whether gas tax, registration fees, etc. should be the situation. Taxing other issues and transferring income is not a sound policy. Failure to adequately change taxes when changes occur such as higher fuel efficiency, alternative power, etc. is not a feasible alternative and promises of no tax increases no matter what is not sound policy.
I’ve said it once, I’ll say it a thousand times: vehicle fee aka wheel tax.
It captures the usage by vehicles that have excellent gas mileage as well as those that don’t use any gas. It should be proportionate to road wear. I can’t recall if the local wheel taxes apply to scooters and motorcycles but it should.
The cigarette tax being used to fund roads is absurd.
What is the best way to collect that? Turn in odometer readings on your tax filings?
I think in this context, the word “borrowing” should be replaced with “making our children pay for it”. It makes the choices much clearer.
Also, raiding the surplus now is a terrible way of using the surplus.
If things are going so well for Indiana economically (I don’t believe they are, but I also don’t believe 4 cents a gallon is a big deal), now is the time to protect the surplus from legislators.
Because left to their own devices, they’ll spend it down during good times and they’ll be nothing left when the bad times hit.
Maybe Mike Pence should go read Genesis 41 and apply the lessons learned.