The untouchable Road Use Tax formula

Todd Dorman
Published: December 27 2012 | 11:38 am - Updated: 1 April 2014 | 3:48 am in
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I guess we should consider ourselves lucky that road repairs in Iowa are not funded by a tax on political courage. We wouldn't have enough pennies to fill a pothole.

From this morning's Gazette:

Fragile efforts to ignite a gas tax debate in the 2013 Legislature will flame out if urban lawmakers try to inject a rewrite of the formula for distributing road-use tax fund revenues into the mix, backers and skeptics agree.

With the next election nearly two years away, supporters of increasing the state’s motor fuel user fee – as Gov. Terry Branstad prefers to call it – see the 2013 legislative session as offering a 50-50 shot, at best, to bump up rates for the first time since 1989.

Currently, motorists who fill their tanks at Iowa pumps pay state taxes of 21 cents per gallon for regular gasoline, 19 cents per gallon for ethanol-blended gasoline, and 22.5 cents per gallon for diesel fuel. Each penny increase in the state gas tax would raise $23 million in revenue and cost Iowans about $4.75 in yearly fuel expenditures. Proceeds from Iowa gas tax are distributed via a formula that provides 47.5 percent to the state’s primary road fund for use on interstate highways and state-owned roads, 24.5 percent to the secondary roads, 20 percent to cities, and 8 percent to farm-to-market roads.

A TIME-21 initiative approved several years ago by lawmakers routed new transportation-related revenue from higher vehicle fees to the highway network by distributing 60 percent to the state system and 20 percent each to cities and counties, but capped it at $250 million annually. Now some urban legislators say they would like to revisit the structure of the road-used tax distribution formula as part of a comprehensive review if they are to consider changing the current fee schedule.

Branstad and top lawmakers say that would open an urban-rural split that would stop the issue cold.

“Forget it,” Branstad said in a recent interview, noting that the Iowa Farm Bureau Federation’s key backing for a motor fuel use fee increase would dissipate if road-use tax money for rural areas was lessened at a time when a proliferation of ethanol plants and more value-added processing is creating a greater reliance and stress on Iowa’s infrastructure network. “Are you kidding me? There’s no chance that’s going to happen. It’s going nowhere.”

Maybe, from now on, we should just let the Farm Bureau decide which roads get repaired or constructed. The group is already writing the state's environmental rules.

Sure, I understand how the Legislature works. Branstad and everyone else in the article who says re-writing the formula would blow up the issue are 100 percent right. You can never go wrong assuming that self-interested politicos will duck tough but necessary calls (see no gas tax increase since 1989), or defend their parochial political interests even if they run counter to the best interests of the state as a whole. So as punditry goes, this is rock solid stuff.

As policy, it's lousy. It's true, there is a rural-urban split in Iowa. Iowa's fastest growing places are urban/suburban and its fastest shrinking are rural. One third of Iowa's population lives in just eight urban areas. Suburban communities, such as Waukee, North Liberty, Fairfax, Marion, etc. are growing at a remarkable clip.

The state's most pressing transportation needs have, over time, shifted to those urban/suburban municipalities and the highways that carry people between them. The Road Use Tax Formula should be changed to better reflect those realities.

It doesn't have to be a massive change. Nobody's talking about shafting rural areas. TIME 21 is a good start. But it's irresponsible to raise a tax on Iowans without being willing to even have a discussion about the flawed formula used to spend it.

Sorry. Carved in stone. Farm Bureau, that's why.

I know the main worry here is that rural interests will withdraw support for an increase. I get that. But I've gotta tell you, I'm a lot less excited about paying more for gasoline just to pump more dollars into the outdated formula. There may be other citified Iowans who feel the same way. Maybe we could form Peeved Urban Motorists for Pavement, or PUMP.

I'd still also like to see any gas tax increase tied to an increase in the Earned Income Tax credit to offset at least some of the sting for low-income workers. I also think it would be appropriate to create a mechanism where the added tax is temporarily rescinded if spiking gas prices cross a certain threshold, $4, maybe $4.50, per-gallon.

And maybe nothing at all will happen.  The governor can't even seem to decide whether he's for or against an increase. I wonder if we could enact a kicking-the-can-down-the-road use tax?

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