July 2013

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Policy The Battle Beyond the Beltway While the federal Highway Trust Fund sputters toward 'Empty,' states start shaping their own infrastructure funding strategies. By Matthew McKinney Over the past several years, Congress has displayed an incredible penchant for gridlock. But in a rare moment of bipartisanship last year, lawmakers were able to put aside their differences to pass a two-year highway bill, the Moving Ahead for Progress in the 21st Century Act (MAP-21). Yet while this law represents a legitimate effort to invest in our nation's infrastructure, it is merely a band-aid on the hemorrhaging Highway Trust Fund, the country's principal mechanism for financing federal surface transportation projects. Given the political difficulties of raising the federal gas tax, which hasn't been increased since 1993, the federal government has a limited set of available tools with which to repair the United States' crumbling surface infrastructure. State governments, no longer able to assume that the federal government will step in to fund the construction of roads and bridges, are developing creative solutions to ensure their respective transportation networks are able to support a growing economy. From increasing gas taxes to implementing mileage-based user fees, states are finding ways to fill the funding gap. Gas Taxes and Increasing Infrastructure Coffers Across the nation, the most common mechanism states are considering to boost highway funding is an increase in their state gas taxes. Like the federal government, many states have kept their gas taxes unchanged since the early '90s, adding to their surface transportation-funding shortfall. Furthermore, just as the federal gas tax isn't indexed to inflation, neither are many state gas taxes, meaning that over those two decades, the purchasing power of the revenues collected has declined. A quick Internet search for "gas tax" will return a laundry list of states considering increasing their gas taxes: South Carolina, Iowa, Minnesota, New Hampshire, Pennsylvania, and many more. Two of the first states to sign gas tax increases into law this year were Vermont and Maryland. Although the states chose different tax-levying mechanisms, both resulted in a net transportation revenue increase. Vermont, which faced a $36 million shortfall in transportation funds, had little choice but to act quickly and decisively. The final agreement resulted in a net gas tax increase of 5.9 cents on top of the existing 19-cent-per-gallon tax. The law creatively adds a 2 percent tax on the wholesale price of gasoline while lowering the per-gallon portion of the tax by 0.8 cents. The tax on wholesale gas means the revenue collected will increase over time as gas prices rise, effectively circumventing the principal weakness of a traditional gas tax: revenues remain static despite inflation (or decrease, in real terms, as vehicles become more fuel efficient). Experts estimate the net tax rate could increase to 6.5 cents by 2016. Maryland's gas tax increase, on the other hand, functions by automatic increases rather than any indexation to inflation. Due to internal political dynamics, the state's Democratic Party was able to push through an incremental set of gas tax increases. An initial 4-cent uptick in the 23.5-centper-gallon state fuel tax will come into effect later this year. The tax will increase another 8 cents in both 2015 and 2016, bringing the overall increase to 20 cents in just four years and resulting in more than an 85 percent rise in state fuel 50 | www.cedmag.com | Construction Equipment Distribution | July 2013 48_Beltway_Feature_KP.indd 50 6/27/13 3:50 PM

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