Extreme High Cost of Fixing Infrastructure Hurting all over the US

Posted on Sun, Mar. 23, 2008

By Paul Nussbaum

Inquirer Staff Writer

So how much would you pay to get out of that traffic jam under I-95?

And what's your preferred form of payment? Gas tax? Tolls? Sales tax? Income tax?

As aging interstate bridges - such as the I-95 span in Port Richmond - crumble, the immediate focus may be on concrete and steel, but the long-term issue is all about money.

Pennsylvania has spent $3.8 billion since 2003 to repair 1,381 bridges, yet the number of structurally deficient bridges increased - from 5,600 to 6,000. Even with one of the highest gas taxes in the nation - and with a newly enacted plan to impose tolls on I-80 - Pennsylvania can't keep up.

The picture is similarly grim around the nation. States are grappling with a 50-year-old interstate highway system that cost much less to build than it does to maintain. Federal and state gas taxes no longer cover the bill.

"I suspect that, with the latest news from Philadelphia, Congress is going to turn its attention to this in a major way," said C. Kenneth Orski, a public-policy consultant in Potomac, Md. "I do see a rising consciousness about the problems of infrastructure, compared to two or three years ago. And I think the I-95 incident will add fuel to the fire."

Pennsylvania's Department of Transportation estimated last year that it would take $11 billion to fix all 6,000 structurally deficient bridges. That would represent nearly 40 percent of the state's budget.

Nationwide, it would cost $188 billion to repair inadequate and deteriorating bridges, according to the American Society of Civil Engineers.

Ultimately, that money will come from motorists or taxpayers, or both. There are many creative financing proposals - including public-private partnerships such as turnpike leases - but eventually the money comes from two sources: user fees and taxes.

Gov. Rendell, standing beneath the then-closed section of I-95 on Tuesday, said the emergency shutdown of that highway and a closure of the Birmingham Bridge in Pittsburgh last month "are a wake-up for us. . . . This incident clearly demonstrates that we need a greater investment in our infrastructure - here in Pennsylvania and across the nation."

Rendell joined California Gov. Arnold Schwarzenegger and New York City Mayor Michael Bloomberg in January to create a coalition of state and local officials to seek more federal money for infrastructure.

Rendell wants to lease the Pennsylvania Turnpike to a private operator to raise as much as $20 billion for transportation funding. And in his budget proposal this year, he urged borrowing $200 million a year to repair bridges.

That's on top of $192.5 million for bridges from newly enacted Act 44, which calls for higher tolls on the turnpike and installation of tolls on I-80 by 2010.

All told, in the current fiscal year, Pennsylvania will spend $1.2 billion on bridges, and Rendell wants to spend $1.6 billion next year.

In New Jersey, where the state's transportation fund is nearly tapped out, Gov. Corzine wants to raise highway tolls by more than 50 percent every four years until 2022 to fund transportation projects and to pay down state debt.

To those who object to such big hikes - and polls indicate that's most New Jersey residents - Corzine says, pick your poison. The alternatives to those toll increases, Corzine says, would be a 20 percent rise in income taxes, a 2-cent hike in the current 7-cent sales tax, or a 50-cent raise in the gas tax.

In Pennsylvania, a Transportation Funding and Reform Commission appointed by Rendell concluded in late 2006 that it would take a 12.5-cents-per-gallon increase in taxes to raise $965 million a year for roads and bridges. That would give Pennsylvania the nation's highest gas taxes - 63.2 cents a gallon, including federal taxes - according to American Petroleum Institute data.

A national commission established to examine transportation needs recommended in January that the federal gas tax, currently 18.4 cents per gallon, be raised by as much as 40 cents over the next five years. It also called for higher state gas taxes, for increased use of tolls, and for peak-hour "congestion pricing" on highways, which would mean higher tolls during the busiest periods.

There has been little enthusiasm in state capitals or in Washington for upping gas taxes, especially as motorists are already facing much higher prices at the pump because of rising oil costs.

The Bush administration has opposed any fuel-tax increase, arguing instead for toll roads, public-private partnerships such as toll-road leases, and other user fees.

"Replacement of fuel taxes by a variety of direct user charges (which can be varied by time of day, congestion, vehicle characteristics, and location . . . ) can and should be expedited as a matter of national policy," said U.S. Transportation Secretary Mary Peters and two other dissenting members of the National Surface Transportation Policy and Revenue Study Commission in January, arguing against the majority's recommendation for higher federal gas taxes.

And a bill has been introduced in the U.S. Senate to create a National Infrastructure Bank. The bank would borrow $60 billion to use for infrastructure projects of "substantial regional and national significance."

Motorists need to accept that they're going to have to pay more to rebuild bridges and highways, said AAA Mid-Atlantic spokeswoman Cathy Rossi. But "we have to reevaluate options and make sure we are allocating scarce resources effectively," she said.

"Polls have told us that motorists are willing to fork out more money if they see a visible difference in roads and bridges," Rossi said. "They want improved safety, less congestion, new roads - or at least newly paved roads - for their money. One thing is for sure: The status quo cannot continue."

Slate Gorton argues in favor of Ref 51..."an imperfect solution"

Referendum 51 raises serious debate on Seattle University campus

October 28, 2002

On Wednesday, October 23, former Senator Slade Gorton, who currently co-chairs the "Yes on Referendum 51" campaign, participated in a panel discussion at Seattle University's transportation forum held in Wyckoff Auditorium. The event, which was co-sponsored by the College of Arts & Sciences and Albers School, provided Gorton with an opportunity to present a pro-Referendum 51 view, while at the same time fielding questions from a panel of students and the audience.

Referendum 51 is an issue that will appear on the November 5 ballot as a method of paying for a statewide 10-year, $7.7 billion transportation program. Changes that would be created by the passing of Referendum 51 include a one-time, 1 percent surcharge on vehicle sales, raising a weigh fee on trucks heavier than five tons, and increasing the state's gasoline tax by 9 cents a gallon over two years. The taxes used from these increases would be used to address problems such as traffic congestion, improving the safety of what the state Department of Transportation calls 2,037 "high accident" locations, and also repairing over 900 earthquake susceptible bridges. "Referendum 51 will not solve all of our transportation problems," said Gorton in his address. "It is the foundation for the house� it's not the house itself."

Gorton emphasized that the government would be accountable for each expense purchased with Referendum 51 money for the next ten years. "I can't remember any state legislature ever doing this before," said Gorton. "If this form of accountability works here, it can, and will, probably be applied to other forms of legislation as well."

In addition to the points brought up by Gorton, the student panel raised some topics for the former senator to speak upon as well. Shelly Fayette, a senior theology and religious studies major brought up the topic of mass transportation several times, asking why more money wasn't going to mass transit when it presented a more viable solution to the problem of traffic congestion. She also mentioned that Referendum 51 didn't present a very cost-effective solution for those with lower incomes. "Public transportation is a social justice issue that our state legislature should be concerned with," said Fayette.

"Under Referendum 51, a greater percentage of money will go to buses than the actual percentage of people who use the bus," replied Gorton. "The legislature is concerned with it [mass transit]. You'll soon have the option of a monorail . . .the problem is, you can't ask the people of Spokane to pay for a monorail in Seattle." Gorton also went on to state that a large amount of opposition towards Referendum 51 stems from the fact that it is not a "perfect" solution. "Perfection is the enemy of good," said Gorton. "I suspect that many people have better ideas� I have better ideas� but we aren't going to destroy them all by voting for this modest proposal in front of us right now."

Analysis of Ref 51 by the Washington Policy Center

Will Referendum 51 Solve Our Traffic Problems?


by Eric Montague
October 2, 2002


The need for increasing the capacity of our state's 80,000-mile network of roads, highways and bridges is clear. Over the past 30 years Washington's road system has not kept pace with the needs of a population that has grown nearly 75% during that time. While there are many opinions about how to keep up with growing roadway demand, few will argue that seemingly endless congestion and hazardous safety conditions severely hamper the state's social and economic development.

Attempts to ease congestion through higher public transit spending and strict Growth Management rules have failed. Despite the efforts of planners to alter people's preference for auto travel, people in Washington continue to choose the freedom of a car for more than 93% of daily trips. After all, at no point in history have people wanted less mobility. So in November the governor and legislature are asking voters to decide if Referendum 51, or some future alternative, is the best solution for meeting the state's increasing transportation needs.

Referendum 51 is a statewide ballot measure that raises taxes and fees to pay for road building improvements. Money from the referendum would be distributed to a list of about 100 projects approved by the legislature. Here is a brief summary of what the referendum says. (A full, plain-English description is in our study "An Overview of Referendum 51," available at www.washingtonpolicy.org under "publications," or by calling (206) 937-9691.)

The measure has five parts. Part one would create a Transportation Accountability Board, with nine members appointed by the governor and confirmed by the legislature, to assist in monitoring the new spending. Part two would increase truck and license fees by 30% over two years, bringing in an estimated $232 million.

Part three would increase the gas tax by nine cents over two years, raising $3 billion. The current gas tax is 23 cents a gallon, the thirteenth highest state tax in the nation. The federal government imposes an additional 18.4 cents per gallon. Referendum 51 would increase the state gas tax to 32 cents per gallon, making our state tax the highest in the nation.

New and used auto sales are now subject to a 6.5% sales tax. Part four of the referendum would raise the tax to 7.5% beginning April 1st, bringing in $1.16 billion more, most of which would be used for subsidized mass transit.

Part five of the referendum authorizes the state to sell $4.5 billion in bonds. Proceeds would be used to pay for highway construction and maintenance. This section also authorizes a separate sale of $100 million in bonds, most of which would be spent on mass transit.

An additional source of funding not mentioned in the referendum would be the interest earned on new revenue, which would bring in about $78 million over ten years. Total revenue from all sources under Referendum 51 is estimated at $7.8 billion. Here's a summary of the new revenues.

Summary of New Revenues Under Referendum 51
9-cent gas tax phased in over two years
$ 3,039,269,000
30% increase in vehicle weight fees $ 232,989,000
1% sales tax increase on new and used autos $ 1,160,178,000
Sales tax on transportation construction $ 165,204,000
Interest earnings $ 78,106,000
Bond proceeds
$ 4,600,000,000
Less debt service $(1,460,805,000)
Total new revenue $7,814,941,000

If voters approve Referendum 51, the new tax money would be spent on projects across the state. The projects fall into twelve categories.


Referendum 51 Planned Spending
% of Total
Roads - GP $4,292,776,000 53.2%
Roads - Improvements $ 299,781,000 3.7%
Roads - HOV $ 733,531,000 9.1%
Public Transit $ 819,900,999 10.2%
Planning $ 25,315,100 0.3%
Freight Mobility $ 133,000,000 1.6%
Safety $ 92,622,160 1.1%
Environmental Retrofit $ 26,253,000 0.3%
Ferries $ 711,192,000 8.8%
Rail - Passenger $ 809,938,000 10.0%
Rail - Freight $ 96,940,000 1.2%
Economic Development $ 30,000,000 0.4%
Total Planned Spending: $8,071,249,259 100.0%

Definitions for Figure Above

· Roads - GP: These are General Purpose (GP) lanes open to all traffic.
· Roads - Improvements: These are upgrades of existing roads, such as better surfaces, road widening, adding climbing lanes on steep grades, etc.
· Roads - HOV: New High Occupancy Vehicle lanes.
· Public Transit: Government operated transit services.
· Planning: Planning includes engineering, environmental studies and other regulatory requirements that must be completed before road construction can begin.
· Freight Mobility: Projects designed to improve the movement of freight.
· Safety: Projects designed specifically to improve the safety of certain roadways and transportation corridors.
· Environmental Retrofit: Upgrades to meet current environmental regulations.
· Ferries: Dock improvements and new ferries for the State Ferry System.
· Rail - Passenger: Rail projects designed for passenger rail improvements, primarily high-speed commuter rail corridors in the Puget Sound region.
· Rail - Freight: Projects designed to improve the movement of freight by rail.
· Economic Development: Projects intended to spur economic growth in certain areas.

You might notice there is a $257 million difference between the revenue projections and planned spending. That is because some projects will take longer than ten years to complete, and because budget planners assume the federal government will provide money for passenger rail service.

Referendum 51 would fund major new projects and would help transportation spending keep up with inflation, but by itself it would not allow us to build our way out of traffic congestion. Determining whether Referendum 51 offers the best solution, or whether legislators will have to tackle the issue afresh when they meet in January, will be up to
Washington voters on Election Day.

Governor Lowry's 1993 Transportation Plan

WASHINGTON

RESEARCH

COUNCIL



POLICY

BRIEF



April 13, 1993



Governor's transportation plan: the cost factor

Gov. Lowry has proposed $937 mil-

lion in tax and fee increases over the

next two years to pay for a broad

range of transportation improvements.

The economic impact of this plan must

be taken into consideration. The plan



Overview

would raise fuel taxes to among the

highest in the nation. Heavy new costs

on motor carriers could result in lower,

rather than higher, state revenue collec-

tions, higher costs for some goods and

services and a loss of businesses. The

governor's proposal to apply the sales

tax to gasoline also raises concerns

about constitutionality and the integ-

rity of the state's transportation fund.



W

ashington motorists may be

looking at a 2 2 cent per

plan are to provide jobs for the state

economy and to solve current and future

Vancouver, Washington.

o Improving rural roads, particularly in



gallon increase at the gas pump if the

governor's transportation plan is ap-

proved. In his "Keep Washington Mov-

ing Plan," released on March 22, Gov.

Mike Lowry proposed a comprehensive

tax package and fee increases to pay for

an ambitious list of transportation projects

in the state.

The financing plan includes a 12 cent

increase in the gas tax over the next

three years, a redefinition of retail sales

subject to the sales tax to include gaso-

line, and an increase in trucking fees.

The governor projects that approving

the program would raise $937 million in

state revenue in the next two years.

Motor carriers would also be looking

at increases in fees and taxes that would

translate to some of the highest in the

nation. This could result in reduced fuel

purchases in Washington state, as op-

erators are induced by high prices to

purchase fuel in other states. Other eco-

nomic effects would include shifts by

businesses to other means of delivering

goods, and potential loss of businesses

especially sensitive to transportation

costs. Tax collections could also be af-

fected if higher taxes and fees encour-

age tax avoidance by motor carriers.

Program Goals

The stated purposes of Gov. Lowry's



transportation problems. The Puget

Sound area has the fifth worst traffic

problems in the country, behind Los

Angeles, San Francisco, Miami and

Washington, D.C. According to the gov-

ernor, traffic congestion costs Washing-

ton businesses more than $1 billion a

year in lost productivity due to delays in

delivering goods, services and people.

The Washington state Department of

Transportation anticipates an additional

increase of 67 percent in miles driven on

Washington highways from 1991 and

2012. "Arterials are like arteries," said

Lowry when he submitted his proposal.

"What we have is cholesterol coming."

Lowry's plan proposes to fund projects

across the state that would "aid com-

merce, create jobs and move commut-

ers more effectively." The projects envi-

sioned include:

o Providing matching state dollars for regional transit projects. These include a bus-and-rail transit plan in the Puget Sound area, costing about $9.3 billion, and the expansion of the Portland MAX system to Vancouver.

o Accelerating construction and completion of the state's high-occupancy vehicle (HOV) lanes.

o Upgrading AMTRAK's rail beds be-

tween Vancouver, British Columbia and



eastern Washington, to help agricultural

products reach the market.

o Repairing the First Avenue South Bridge in Seattle and Highway 18 be-

tween Auburn and I-90 in East King County, and improving Spokane's North-

South bypass.

o Maintaining and upgrading existing highways, roads and streets.

Financing Sources

The governor proposes three main sources at the state level to pay for the plan, raising about $922 million in the next biennium.

o Increase the gas tax 5 cents per

gallon in fiscal year (FY) 1994 and an-

other 5 cents in FY 1995. This would

bring in an estimated $370 million in the

next two years. An additional 2 cents per

gallon gas tax would be levied between

July 1, 1997 and June 30, 2003.

o Extend the state's 6.5 percent sales

tax to include all motor vehicle fuels.

This would raise an estimated $465 mil-

lion.

o Raise combined license fees on

trucks to generate about $87 million.

Cities and counties would be autho-

rized to extend their local-option sales

taxes to fuel sales. (Local taxes include

a 0.5 percent sales tax in the City of



906 S. Columbia, Suite 350 o Olympia, WA 98501 o (206) 357-6643 o 1-800-445-1086 o FAX (206) 754-2193

Page 2 April 13, 1993

Seattle and a 0.5 percent tax in King County.) This would raise an additional $87 million.

In order to receive matching funds for their regional transportation plans, vot-

ers in King, Pierce and Snohomish coun-

ties and cities must first approve an increase of 0.4 percent in their lo-

cal-option sales tax.

Constitutional issues raised

Concerns have also been raised about

the prudence of earmarking sales tax

revenue to transportation purposes, as

the governor proposes to do. Amend-

ment 18 to the Washington Constitution,

adopted in 1943, requires that all mon-

WASHINGTON RESEARCH COUNCIL

highest among the 50 states. Ahead of

Washington were Rhode Island and

Connecticut at 26 cents each, Maryland

at 23.5 cents and Nebraska at 23.4

cents.

Washington's tax on diesel fuel is 10th

highest in the nation, below New York

(33.7 cents), Pennsylvania (28.4

cents), Illinois (27.6 cents), Indi-



"The cost is substantial," Lowry

acknowledged, "but not nearly as much as if we don't do it."

Not everyone agrees. Rep.

Jeannette Wood (R-Woodway ), a

member of the House Transporta-

tion Committee, said, "Many of the

projects that would be funded by

the gas tax increase are worthy,

but the tax increases that will be



Future budget constraints will invite

attempts to divert the gasoline sales

tax to other programs. . . The integ-

rity of the transportation fund will

be constantly at risk.



ana (27 cents), Vermont and

Rhode Island (26 cents), Ne-

vada (24.5 cents), Ohio (24

cents) and Nebraska (23 .8

cents).

Fuel prices would rise sharply

If the transportation plan were

to pass, Washington state would

have the highest gas tax in the



proposed, taken together, are just too

much for Washingtonians to afford."

Some eastern Washington legislators

argued that they already pay higher gas

prices and have a higher driver/popula-

tion ratio than western Washington, and

will therefore be harder hit by increases

in the gas tax.

Rep. Tim Sheldon (D-Hoodsport) ex-

pressed concern to the governor at a March 22 Transportation Commit-

tee hearing that rural families would

be hit harder than urban dwellers.



ies from motor vehicle fees and excise

taxes on motor vehicle fuel be "placed in

a special fund to be used exclusively for

highway purposes." The governor hopes

to avoid a conflict with the legal ban on

using money in this fund for other than

highway purposes by depending on new

sales taxes on gasoline, rather than

constitutionally protected motor vehicle

fees and fuel taxes, to pay for public

transit projects.



nation at 45 cents per gallon. It would

also join eight other states that tax motor

vehicle fuel under the sales tax.

The total tax increase for the ordinary

motorist would be 22 cents per gallon.

The higher gas tax would account for 12

cents of the increase. The other 10 cents,

based on an estimated FY 1993 gaso-

line price of $1.25 per gallon, would

accrue from the extension of the sales

tax at both the state and local levels to

gasoline.

The Washington Department



His constituents, he said, tend to

drive pick-up trucks and travel ru-

ral roads, resulting in poorer gas

mileage and higher costs than for

those who own economical cars

and do most of their driving on the

freeway. Rep. Sheldon said these



Total combined trucking fees and of Transportation projects that

the average gasoline price of all

taxes of $7,271 currently place Wash- grades and services in FY 94

will be $1.30. Gov. Lowry's plan

ington 6th highest in the nation. would raise gas prices to $1.53

per gallon when his proposed

12-cent gas tax increase is



costs could potentially amount to $600

annually, a large burden on low-income families.

A February report by the Washington,

D.C.-based Tax Foundation, "The Price

of Mobility: Gasoline Taxes in America,"

found, after analyzing current federal

and state gasoline tax burdens on indi-

viduals over a range of income brackets,

that "the gasoline tax hits poor and

middle-income Americans the hardest."

Families with incomes under $10,000,

according to the report, pay 3.21 percent

of their total income in federal and state

gasoline taxes, while those earning more

than $200,000 pay only 0.17 percent of

their income.



This tool, however, is a double-edged

sword. If the new sales tax is not consti-

tutionally restricted to highway uses, it

cannot truly be restricted to transporta-

tion uses either. Future budget con-

straints will invite attempts to divert the

gasoline sales tax to other programs,

just as interest in the state transportation

fund will be shifted to the general fund

this year to help close a projected deficit.

The integrity of the transportation fund

will be constantly at risk, and state funds

for local transportation projects con-

stantly in doubt.

How Washington compares now

As of January 1992, Washington's 23

cents/gallon tax on gasoline ranked fifth



added to King County's 8.2 percent state

and local sales tax.

That estimate excludes any increase in the federal gas tax, which stands now at 14 cents per gallon. President Clinton's proposed energy tax would add an esti-

mated 7.5 cents per gallon, boosting the price at the pump to $1.62 per gallon.

Consumers of diesel fuel would see

an increase of 44.1 cents per gallon under the governor's plan.

Costs to Motor Carriers

Under current law, any Washington

state licensed truck or tractor-trailer rig

exceeding 6,000 pounds empty scale

weight must pay a gross vehicle weight

(GVW) license registration fee. The

WASHINGTON RESEARCH COUNCIL

trucker must pay an additional annual

2.2 percent excise tax levied on the

value of the vehicle and a trailer registra-

tion fee as well. According to data com-

piled by the Paragon consulting firm for

the Research Council, Washington reg-

istration and weight fees for an 80,000

pound truck are currently $3,585. This

compares to fees of $2,951 in California,

$132 in Idaho and $320 in Oregon. (Idaho

and Oregon do not have weight fees).

Gov. Lowry's transportation proposal

would increase GVW fees by 50 per-

cent. The current GVW fee of $1,158

would increase $ 7 5 9 , raising

Washington's total registration and weight fees to $4,344.

Total combined trucking fees and taxes

of $7,271 currently place Washington

6th highest in the nation, behind Ari-

zona, Oregon, New York, Kentucky and

Montana. According to Paragon, the to-

tal tax and fee burden on Washington

motor carriers is roughly equivalent to

those in Idaho ($7,084) and California

($6,933). The average Washington

trucker, however, would be looking at an

increase of 57 percent if the governor's

proposal were adopted. This increase

April 13 1993 Page 3

Comparative Diesel Fuel Tax Rates

as of March 1993

State Retail Sales Tax Total State

Deisel Fuel Tax on Diesel Fuel Diesel Fuel Tax

(Cents per gallon) (Percent) (Cents per gallon)

Washington 23 None 23

Idaho 21 None 21

California 17 8.5% = 8.7 Cents1 2 25.7

Oregon None3 None3 None3

1 Based upon diesel price of $0.817 (Average pump-price of $1.248 per gallon, less $0.201 federal fuel tax and $0.23 state fuel tax).

2 California state sales tax of 5% plus 3.5% local-option "transaction tax" levied by larger cities such as San Francisco. This tax is not levied as a "use-tax."

3 Oregon levies a ton/mile tax based upon weight. A 5 axle tractor plus trailer rig with an average

weight of 80,000 pounds would pay 14.55 cents per mile. Additional axles reduce the levy.

Additional weight, in 2,000 lb. increments, increases the levy. With an average 6-miles-per-gallon

fuel efficiency, the Oregon ton/mile tax is equivalent to a gas tax of 87.3 cents per gallon of fuel

consumed.

scale could reduce the competitiveness motor carriers and fuel tax collections by

of smaller trucking companies. the state are likely to decline if the addi-

According to Paragon, tional fees and taxes proposed by the

Small carriers typically buy fuel from a governor are adopted. There are at least

retailer, such as a key-card fuel depot four reasons for the projected decrease.

or truck stop. Larger motor carriers buy Tax avoidance. Interstate motor carri-

wholesale fuel directly from jobbers who ers pay the state's motor carrier fuel use

deliver larger volumes of fuel to the tax under a system of self-reporting.

carrier's privately-owned and operated



translates to a total of $11,399, slightly

less than Oregon's $11,960, now 2nd highest in the nation.

Paragon notes that estimates of total taxes and fees may vary depending on the source. The fuel tax is generally calculated on a national fuel consump-

tion figure of 5.7 miles per gallon.

Washington's figures, however, are usu-

ally based on a 5.0 miles per gallon figure, due to the high number of logging trucks operating on back roads rather than interstate highways, where mile-

age is somewhat better.

An increase in fees and taxes on this



fuel depot. The pump price paid by a

small carrier at a truck stop can be up to

20 cents per gallon greater than the

volume wholesale price paid by large

motor carriers. With such a price dis-

parity, a small carrier with only 10 five-

axle tractor-trailer rigs (logging 80,000

miles annually) will pay $2,634 more

annually in retail sales tax on fuel pur-

chases. Under the traditional cents-

per-gallon motor vehicle fuel tax, both

the small and large carrier, when buy-

ing equal amounts of fuel, would have

paid an equal amount in taxes.

Economic Impacts

In-state sales of goods and services to



Operators are required to record and

report fuel purchases and miles traveled within Washington. On the basis of these reports, the fuel use tax is then com-

puted at a rate of 23 cents per gallon, and paid quarterly to the state Depart-

ment of Licensing.

Washington state is also a party to the

International Fuel Tax Agreement (IFTA).

Under this system interstate carriers reg-

ister in their "base," or home, states, and

report all interstate mileage and diesel

fuel usage, as well as taxes paid at the

pump in various states, to their base

states. Each base state then redistrib-



Tax & Fee Burdens for Typical Motor Carrier



MVET/REG Tonnage Other State Sales Tax Weight-Dis- Total Price



or License Fuel Taxes on Fuel tance Tax per Mile



Current Washington $2,067 $1,518 $6.75 $3,680 - - $7,272 0.0909



Proposed Washington $2,067 $2,277 $6.75 $5,280 $1,769 - $11,399 0.1425



Idaho $132 - - $3,360 - $3,592 $7,084 0.0886



California $1,522 $1,429 - $2,720 $1,262 - $6,933 0.0867



Oregon $320 - - - - $11,640 $11,960 0.1495

Page 4 April 13, 1993 WASHINGTON RESEARCH COUNCIL

utes tax revenues to other IFTA-mem- their revenue bases by attracting con- for trucks to travel through the state to



ber states according to the actual mile-

age traveled in each state.

Based on experience in other states, the collection rate for these self-reported taxes is likely to drop as the tax

rate increases. A high differential

between fuel taxes in Washing-

ton and in neighboring states in-



sumers from bordering states. "The rev- reach other states. Uncompetitively high

enue gains achieved by a state with low trucking fees and taxes, combined with

excise taxes," Price Waterhouse said, high fuel taxes, may deter new business

"necessarily come at the expense of the from locating in the state, or cause exist-

ing employers to leave for lower-

cost locations.

Based on experiences in other

Sources



creases the incentives for motor

carrier operators to "cheat" the

system by failing to make accu-

rate reports of miles traveled and

fuel purchased in the state. It also

substantially increases the incen-



states, the collection rate for self-

reported taxes is likely to drop as

the tax rate increases.



Advisory Commission on Intergovern-

mental Relations. 1992 Significant Fea-

tures of Fiscal Federalism. Volume 1. Feb-

ruary 1992.

American Legislative Exchange Coun-

cil, "Voting with Their Feet." The State

Factor. 18:11, August 1992.



tive for trucks to fill up in another state,

such as Idaho, and transport freight through Washington without ever buy-

ing fuel here.

The loss of fuel tax revenue to the

state is only the first result of this tax

avoidance practice. It would also result

in a considerable loss to truck stop op-

erators in sales of ancillary products

such as cigarettes, snacks and meals,

and to the state in sales tax revenue.

One eastern Washington operator re-

ports that he sells about 20 cents of

these products to truckers for every gal-

lon of fuel that they purchase.

The Connecticut legislature rolled back

that state's high diesel fuel tax in 1991

after reports from truck stop operators

that they were losing business to com-

petitors in the three bordering states

because of the differentials in fuel prices.

A consultant has reported to the Con-

necticut General Assembly that "after

the decrease of diesel fuel taxes from 22

cents per gallon to 18 cents. . . sales at

truck stops on the major highways have



states that have increased their tax rates

in order to raise more revenue."

Although the effect can be expected

to be greater in New England, where

mileage between state borders is so

much shorter, the long-distance fuel

capacity of interstate motor carriers

makes it likely that higher prices would

mean lower consumption of fuel here as

well.

Shifts to other modes of delivery.

Higher fees and taxes will be passed on

to the consumer through higher trans-

portation costs. Some companies may

find it more cost-effective to ship their

goods through air and rail freight rather

than motor carriers.

Loss of new business. Washington

state is geographically disadvantaged.

Businesses need not locate within the

state if the state is not the primary source

of raw materials or the primary market

for finished products. Nor is it necessary



Elaine Ramel Davis and Steve Excell, Para-

gon, "An Economic Assessment of Governor

Lowry's Gas Tax Increase and New Sales Tax on

Gas." (Unpublished manuscript.) March 31, 1993.

Gov. Mike Lowry, "Lowry Proposes to Keep

Washington Moving," March 22, 1993.

State of Washington. Department of Transpor-

tation, Transportation Commission. "Statewide Transportation Systems Plan: Draft Service Ob-

jectives." Fall 1992.

The Tax Foundation, "New Foundation Report Traces Gasoline Excise Tax Collections," Tax Features, February 1993.

Rep. Jeanette Wood, "'Lowry Tax Week' be-

gins with Gas Tax Increase," March 22, 1993.

The Washington Research Council is a non-profit, non-governmental research or-

ganization. Its mission is to promote efficient government and effective public policy through independent fiscal analysis of im-

portant policy questions and broad commu-

nication of its findings.

The Washington Trucking Associations,

Inc., provided partial funding for this study.



increased, generating additional sales

tax revenue in excess of $1 million."

Reduced demand. As with most goods



Comparative Registration & Weight Fees

for an 80,000 lb Truck



and services, as fuel prices rise, con-

sumption is likely to decrease.

A February 1993 study by Price

Waterhouse conducted for the Ameri-

can Legislative Exchange Council found

"significant cross-border activity" in items

subject to state excise taxes (including

Washington

Idaho

California

Oregon



Current Registration

and GVW Fees

$3,5851

$1322

$2,9513

$3204



cigarette, alcoholic beverage and gaso-

line taxes) in the New England states as

a result of tax disparities . Price

Waterhouse determined that states that

maintain low excise taxes can increase

1 $3,585 includes 2.2% annual excise tax on truck valuation, $42.75 in trailer registration fees

and $1,518 gross vehicle weight (GVW) licensing fees. The governor's 50% increase applies to only the $1,518 GVW fee. 2 License fee with no weight fee. 3 License fee of $1,522 and GVW

fee of $1,429. 4 License fee with no weight fee.