S.406 may be the worst gas tax/roads bill introduced this session. The bill would allow the quasi legislative quasi executive State Fiscal Accountability Authority (SFAA) (a successor to the Budget and Control Board) to impose an additional gas tax on top of the existing tax on motor fuels. The SFAA would determine the size of the tax to be imposed each July 1 by monitoring the Department of Transportation (DOT) and calculating the amount necessary to fully fund expenses associated with new and continuing projects during the upcoming fiscal year. The new tax would be set at a rate that would generate the additional revenue needed to fully fund DOT projects after the revenue from the existing gas tax is exhausted. Following the initial imposition of the tax the SFAA would not be able to increase the size of the tax by more than 10 cents a year.
S.406 also provides for the creation of an income tax credit for payments made towards the new gas tax. The Department of Revenue (DOR) will determine a standard credit based on the estimated average amount paid towards the new tax, or taxpayers could itemize their fuel purchases to receive a credit worth the total amount they paid toward the new tax.
Finally, the bill makes a minor change to the DOT commission by giving the Governor an additional appointment. This brings the total commission membership up to 9 with 7 legislatively chosen members and 2 members appointed by the Governor.
This bill would give carte blanche to an unaccountable, separation of powers violating entity to raise taxes on citizens. To make matters worse the bill doesn’t impose any of the reforms needed to ensure DOT and other infrastructure authorities adequately utilize the resources they have. Taxpayers shouldn’t be forced to suffer at the pumps to enable further wasteful spending.
As for the tax credit, SCPC has outlined some of the problems with tax swaps in our analysis of the Governor’s roads proposal. Some citizens will see a net tax increase even if they receive the standard credit. Nor is it reasonable to ask citizens to go through the time consuming process of itemizing all their fuel purchases throughout the year and filling out Government paperwork to receive a return of their money without interest.
In the long run all citizens will likely see a tax increase as lawmakers will wish to make up for the funds this bill will divert from the general fund to the DOT. If lawmakers wish to increase DOT funding by this method they would be far better off avoiding the roundabout tax swap approach and simply cutting general funds expenses and putting the savings towards funding the DOT.