Why the gas tax isn’t keeping pace with state’s needs

Lawmakers will soon be debating a new transportation package.

As they do so, it’s worth looking at the existing gas tax.

Once hailed as a hero for building a world-class system of roads throughout the country, the gas tax has fallen on hard times, unable to keep pace with a crumbling infrastructure that’s eroding faster than it can be fixed.

“Since 1990, transportation construction costs have risen by 63 percent, meaning that a construction project that previously cost $50,000 would now cost over $80,000 to complete,” states a policy brief last year by the Institute of Taxation and Economic Policy, a non-partisan research organization.

A fixed-rate tax like Washington’s, which collects a specific number of cents on each gallon of gas sold, is “the most unsustainable type of gas tax,” the report states, largely because of increasing fuel efficiency and the ever-rising costs of construction.

Thirty-two states have this type of fixed-rate gas tax.

Washington’s 37.5 cents-per-gallon gas tax is the ninth-highest in the nation, according to an analysis by the Washington State Department of Transportation.

Yet Gov. Jay Inslee told a group of local government officials in September 2013 that an increase in the gas tax of perhaps 6 to 10 cents is needed to prevent more disasters like the May 2013 collapse of the I-5 bridge over the Skagit River.

Information in the report supports Inslee’s concern: “According to the American Society of Civil Engineers, a quarter of America’s bridges are structurally deficient or obsolete, one-third of the nation’s major roads are in poor or mediocre condition, almost half of all major urban highways are congested and nearly half of all Americans lack access to bus or rail transit.”

Despite these problems, the report says the gas tax is a vital funding source, accounting for about 30 percent of state-sourced highway funding.

In Washington, that amount is lower and appears to be dropping — listed as 23 percent of the 2013-15 transportation budget’s projected revenue of $9.165 billion, compared to 32.5 percent of the $7.9 billion revenue in the 2011-13 budget.

Gas taxes collected are projected to total $2.4 billion over the 2013-15 biennium, compared to $2.3 billion in 2011-13, according to the Legislature’s Joint Transportation Committee.

The rest of the money in the 2013-15 biennial transportation budget comes from bonds (23 percent), federal funds (26 percent), vehicle license, permits and fees (12 percent), and other sources (16 percent).

Washington residents actually pay 55.9 cents per gallon in taxes at the pump, as the federal government levies 18.4 cents per gallon on top of the state’s 37.5 cents.

According to WSDOT, the state’s 18th amendment dedicates the state’s gas tax to “highway purposes,” with the state getting about half the gas tax money to support WSDOT programs including the state ferry system, which is deemed a highway system by state constitution.

The other half of the gas tax goes to cities, counties and other agencies for use on roads that are not part of the state highway system.

Some of that money filters down in the form of grants for projects to ease congestion, primarily in cities, and some of the money is distributed directly, according to the committee.

Cities get 2.96 cents, distributed based on population, for construction, maintenance and policing of city streets. Counties get 4.92 cents, with 10 percent of that evenly distributed among counties, 30 percent by population, 30 percent based on annual road costs and 30 percent based on construction and maintenance needs.

For Snohomish County, the gas tax amounts to roughly $9 million of its $100 million Public Works roads budget, said Scott Camp, manager of the county’s financial and accounting department.

Payments are distributed to the county monthly, he said, so can vary. One-third of the money goes toward the county’s capital budget, for improvement projects and the like, one-third to preservation and maintenance and one-third to traffic operations, such as planning and traffic signals.

Paying off the bonds on past projects is another challenge the state faces. Camp said bonds are a common method of paying for transportation projects, yet the Joint Transportation Committee notes an increasing amount of debt consuming a larger and larger portion of the gas-tax pie.

“The debt service peaks around 70 percent of total state gas tax revenues in 2018-20,” it predicts, leaving only 30 percent of the gas tax for new projects.

Paying the state 37.5 cents per gallon at the pump may sound like a lot to motorists, especially considering the rate was 1 cent per gallon when Washington first imposed the tax in 1921, but the Institute of Taxation report says gas taxes have actually declined.

“When viewed as a percentage of families’ household budgets,” the report states, “state gas taxes are lower than at any point since the widespread adoption of those taxes at the end of the 1920s.” Adjusted for construction costs, the rates “are a full 17 percent lower today than they were in 1990.”

As for the federal tax of 18.4 cents per gallon, a report released July 2013 as a project of The George Washington University in Washington D.C., “Face the Facts USA”, notes that the federal gas tax rate hasn’t changed in 20 years, and claims that’s reduced the money for road repairs by 35 percent.

“Americans pay far less in total gas taxes than any other industrialized country except Mexico, where gas is subsidized,” the report says, noting that Canada pays 80 cents per gallon, the U.K., $3.31 and Germany, $3.43.

Still, increasing the gas tax is a tough sell. In the state of Washington, the last time the gas tax was increased was in 2008. Since 1990, counties have had the option, requiring voter approval, of instituting their own gas tax of up to 10 percent of the state gas tax. In 1994, with the gas tax at 23 cents per gallon, Snohomish County tried for a 2.3 cent tax, but the effort failed. To date, no county in the state has its own gas tax.