Big Push To Raise Iowa's Fuel Tax

Iowa Farm Scene

Increased revenue is needed to repair roads and bridges, say backers of proposed gas tax hike.

Published on: March 5, 2013

Like it or not, it's time to raise Iowa's fuel tax, say backers of a proposal being discussed in the Iowa Legislature. Increased revenue is needed to pay for repairs to the state's deteriorating roads and bridges, and a tax on gasoline and diesel fuel is a user fee, say supporters of such a move. They also point out that the state's fuel tax hasn't been raised since 1989.

For months lobbyists for road builders and contractors, along with other organizations advocating a motor fuel tax hike, have been pushing Iowa lawmakers to raise Iowa's gasoline and diesel fuel tax by 10 cents per gallon. On February 27 in the rotunda of the Iowa statehouse in Des Moines, proponents gathered under a banner proclaiming "It's Time for a Dime" in their public push for a fuel tax increase.

ITS TIME FOR A DIME: There is support in the Iowa Legislature for raising the states motor fuel tax by 10 cents a gallon. Road and bridge repairs are needed and the rate per gallon hasnt been increased since 1989, say backers of proposed legislation. Raising the fuel tax to create the needed revenue may happen in the 2013 legislative session, but itll be an uphill battle.
IT'S TIME FOR A DIME: There is support in the Iowa Legislature for raising the state's motor fuel tax by 10 cents a gallon. Road and bridge repairs are needed and the rate per gallon hasn't been increased since 1989, say backers of proposed legislation. Raising the fuel tax to create the needed revenue may happen in the 2013 legislative session, but it'll be an uphill battle.

Their message: if the gas tax isn't increased, then lawmakers need to find another way to pay for an estimated $215 million annual backlog of critical infrastructure repairs identified by the Iowa Department of Transportation. According to the Iowa DOT's latest analysis of road and bridge conditions, the revenue collected to maintain the system from all sources falls $1.6 billion short of what is needed every year. However, the most critical shortfall is $215 million a year—what is needed and isn't being met to fix the most seriously deteriorated and unsafe roads and bridges.

Supporters list reasons for an increase, but the pushback against a fuel tax hike is strong, too
Supporters of a fuel tax increase include Iowa Farm Bureau, General Contractors Association of Iowa, Iowa Good Roads Association, Iowa Soybean Association, Iowa Corn Growers Association, Association of County Supervisors and the Iowa Chamber of Commerce Alliance.

Organizations that are against raising the fuel tax include Iowans for Tax Relief, the Iowa branch of Americans For Prosperity and the Republican Party of Iowa. Republican Party chairman A.J. Spiker recently wrote a letter to Rep. Josh Byrnes, a Republican from Osage who chairs the House Transportation Committee and supports a gas tax increase. In the letter, Spiker asked Byrnes to withdraw his support. Byrnes responded, "I'm doing what is right for my constituents back home. The Farm Bureau represents my constituents. And all these different associations, such as the corn and soybean growers and others, speak for the Iowans I represent."

~~~PAGE_BREAK_HERE~~~Spiker says his letter was a reminder to Byrnes that the party is against the tax increase. "The Republican Party of Iowa's platform is clear. We do not support an increase in the gas tax."

A fuel tax increase could be phased in over a three-year period
The legislation is still being drafted. One proposal calls for a 10-cent tax increase on gasoline and diesel fuel that motorists would pay at the pump which would be phased in over a three-year period. It would be a 3-cent-per-gallon increase in 2014, 3 cents in 2015 and 3 cents in 2016. Additionally, the legislation may call for extending the formula for determining the tax (which is now set to expire June 30, 2013) for 10 years. Each additional penny of fuel tax is expected to raise $21 million to $23 million a year.

State Sen. Tod Bowman of Maquoketa is a Democrat who chairs the Iowa Senate Transportation Committee. He thinks the bill will need votes from 12 to 14 Republican Senators to get it through the Democrat-controlled Senate. The Republicans have control in the House. Likewise, Byrnes says the bill would have to have bipartisan support to get it passed by the House.

Iowa Gov. Terry Branstad, a Republican, plays a big role, too. Branstad's support of the gas tax increase is conditional, depending on whether the Legislature passes the commercial property tax reform legislation which Branstad wants.

Ag groups list reasons for raising Iowa's fuel tax 10 cents per gallon
The Iowa Soybean Association's board of directors decided raising Iowa's fuel tax was their top legislative priority for the 2013 session. ISA joined ranks with the Iowa Corn Growers Association and Iowa Farm Bureau. Farmers seldom support tax increases of any kind. But there are some compelling reasons why an increase makes sense for farmers, and their urban neighbors, says Carol Balvanz, ISA's policy director.

"The dollars in Iowa's road use tax fund haven't been adequate to keep our roads and bridges properly maintained for several years," says Balvanz. "Increasing the fuel tax is a logical way to fill the gap since it amounts to a user fee for everyone using Iowa's roads, including out-of-state drivers."

That message and other reasons for raising Iowa's fuel tax resonated with over 500 voters surveyed last summer by Public Opinion Strategies, a group hired by ISA and ICGA to conduct the survey. Many of the individuals surveyed changed their minds about supporting an increase in the fuel tax after discussing the situation. "We've been providing this information to legislators during our visits with them, so that they have answers for their constituents who might question their support for increasing the state fuel tax," says Balvanz.

Legislators hear more often from people who oppose any type of tax increase
Still, many legislators are reluctant to vote for a tax increase of up to 10 cents per gallon. Tax issues are frequently cited in election campaigns, Balvanz notes. Legislators hear far more often from those who oppose any tax increase, than they hear from those who might see it as a long-term benefit.

~~~PAGE_BREAK_HERE~~~Paul Trombino, director of the Iowa Department of Transportation, says the department has taken steps to become more efficient and is taking even more steps to hold spending in line. But there is no other source for revenue to make these needed repairs to roads and bridges, he notes, if new revenue from a gas tax increase doesn't come in -- other than cutting back on the road work the Iowa DOT is contracting for currently.

Following are some additional reasons to support an increase in Iowa's fuel tax as cited by ISA, ICGA, Farm Bureau and others:

* The Iowa Road Use Tax Fund is constitutionally protected and is used only to maintain and improve roads and bridges. An increase in the fuel tax is earmarked for that purpose.

* Rural roads make up nearly 80% of the state's 114,000 mile road system and those roads are essential to agriculture and crop production. Having good farm-to-market roads is vital to the state of Iowa's economic health. For example, Iowa exports one-half of the soybeans produced in the state. Once harvested, the crop needs good roads and bridges to reach markets.

* The state fuel tax hasn't been raised since 1989 and construction and repair costs have more than doubled since then, creating a shortfall in road and bridge repair budgets.

* Since Iowa is crossed by two major interstate highways, out-of-state drivers will pay an estimated 20% of the increase in the fuel tax collection.

* The benefits would far outweigh the cost per driver. An increase of 10 cents a gallon in the fuel tax would cost a 15,000 mile-per-year driver only about $68 more per year. The cost of vehicle repairs caused by poor quality roads is far greater than that.

Meanwhile, the anti-fuel tax increase lobby is also putting their message across. They point out that the federal excise tax on gasoline is now 18.4 cents per gallon and the Iowa tax is 22 cents, which is a total of 40.4 cents Iowans are already paying in gas tax. The anti-fuel tax increase lobby says "That's enough!" However, promoters of the proposed gas tax increase point out that all of Iowa's neighboring states except Missouri have higher fuel taxes.

Scott Newhard, executive vice president and chief lobbyist for the Associated General Contractors of Iowa, bristles at the mention of the anti-fuel tax campaign. "What is concerning to us is the out-of-state groups coming in here with their own agendas," he says, referring to Americans For Prosperity, which launched a "No Gas Tax Increase In Iowa" campaign last month. The campaign includes an electronic petition for people to sign opposing any fuel tax increase and pre-drafted letters on its website. Americans For Prosperity is based in Washington, D.C. but has local chapters in different states.

Fuel tax is a dedicated user fee that was originally established to pay for roads and bridges
The voters of Iowa 70 years ago approved a constitutional amendment that earmarked revenue from taxes on motor vehicles and fuel exclusively for road construction and maintenance. That money can't be siphoned off to be spent on any other state needs.

The last time Iowa raised the gas tax was in 1989, and in the intervening 24 years, overall traffic in the state has increased 36%; heavy truck traffic has increased 42%. Meanwhile, the need for road and bridge construction and repair has surpassed the available revenue. Inflation has driven up the cost of road construction and maintenance, and the problem is aggravated also by the increasing fuel efficiency of vehicles. Drivers travel more miles per gallon, creating wear and tear on roads and bridges while paying the same or less in gas taxes.

Based on Federal Highway Administration data, Iowa now ranks 38th among the 50 states in the condition of rural interstate highways and 34th in bridges. Proponents of the gas tax increase note that Iowans demand a modern system of roads and bridges. That system should be well-maintained, safe and able to handle traffic demand. The state gas tax is a special fee created for that purpose and it is falling short of the need. They say drivers who use Iowa's road system should expect to pay their fair share for the construction and maintenance of that system.