Minnesota is the only state in the nation with a divided Legislature — the House is majority DFL and the Senate is majority Republican. Why? Do Minnesotans desire some balance?
Balance can be useful in the current gas tax debate. Gov. Tim Walz (DFL) wants a 20 cent per gallon gas tax increase to cover $6 billion in unpaid road and bridge projects projected to come during the next 20 years.
Republicans don’t disagree about the need to fix roads and bridges, but oppose the tax increase, especially its size.
The last increase in 2008 amounted to 8.5 cents, which was phased in by 2012. Since then, Minnesota lawmakers have been distracted while driving this issue. Meanwhile, 27 other states worked on gas taxes. Eleven states now have indexing gas tax amounts based upon inflation.
During the 2008 debate, former Gov. Tim Pawlenty (R) reportedly said he’d consider supporting a “tiered” gas tax, which is raised or lowered based on the price of gas. Mr. Pawlenty vetoed the fixed gas tax increase passed by the DFL-controlled Legislature. His veto was overridden. The Minnesota Chamber of Commerce favored a 5 cent gas tax increase in 2008, which showed business leaders supported reasonable investment to fix roads.
Minnesotans currently pay 28.6 cents per gallon in state tax, not counting 18.4 cents in federal tax. The U.S. average state gas tax is 33.78 cents, according to the National Petroleum Institute.
• North Dakota - 23 cents
• South Dakota - 30 cents
• Wisconsin - 32.9 cents
• Iowa - 30.5 cents
Highest gas tax states:
• Pennsylvania - 58.7 cents
• California - 55.22 cents
• Washington - 49.4 cents
• Minnesota - 48.6 cents (if 20 cent tax passes)
Raising the tax 20 cents per gallon to 48.6 cents puts Minnesota at a disadvantage with its neighbors. Truckers, commercial vehicles and savvy RV owners and other tourists driving through the state are likely to fill up at the border and keep driving to the next state for the next fill.
Fixed gas taxes, like we have in Minnesota, are unsustainable. As cars and trucks become more fuel efficient, fewer gallons of gas could be purchased with fewer gas taxes collected. The only way for a fixed tax state to keep up is to keep raising its tax.
That puts fixed gas tax states in a position to catch up every few years by raising its gas tax. In between increases, projects will go unfunded and states will be in a perpetual state of catching up. Those who favor a fixed tax should also favor regular tax increases — if they are serious about keeping up with road repairs.
Minnesota has a chance to take a fork in the debate and consider a tiered gas tax. According to the Institute on Taxation and Economic Policy, six states now have variable rate gas taxes that adjust with the price of gas, or fuel efficiency changes, or inflation, or other factors.
Some tiered rate states raise taxes as gas prices increase. This is hard on consumers. Minnesota’s tax could stay the same or decrease as gas prices increase. When gas prices decrease, the tax could incrementally increase. Allowing the sliding scale to work this way helps taxpayers during peaks and helps the state collect more during the valleys to catch up and stay caught up.
A tiered tax is a fork in the road worth exploring.
Matt McMillan is CEO of Press Publications.