House Gas Tax vs. Senate Gas Tax: A Comparison

LAWMAKERS HAVE TO COMBINE TWO BAD BILLS. THINGS COULD GET WORSE.

The House and the Senate have both passed bills that contain significant tax increases, insignificant reform elements, and negligible transparency measures. What happens next?

The legislation will go to a conference committee where three lawmakers from each chamber will attempt to reconcile them. In conference committee, the committee members are strictly limited to the elements already in the legislation, unless they receive free conference powers on any specific parts of the bill (which takes a two-thirds majority vote in each chamber). For instance, if the conferees couldn’t agree on either the House’s 10-cent gas tax increase or the Senate’s 12-cent gas tax increase, they could go back to their respective chambers and ask for free conference powers to rewrite that particular section as an 11-cent gas tax increase.

Unless this happens, however, conferees will have to choose between the differing elements in each version as written. Below, we compare the bill’s two versions.

(Click here for a detailed side-by-side comparison.)

What both bills agree on

What both the Senate and the House bills agree on is a substantial increase in the tax on gasoline and numerous fee increases. The bills vary in the amounts, but those differences are minor.

Gas tax increase

► House: 10-cent tax hike (from 16.75/gallon to 26.75/gallon)

► Senate 12-cent tax hike with automatic increases built in for inflation (from 16.75/gallon to 28.75/gallon)

Changes existing vehicle sales tax of 5 percent capped at $300 to “infrastructure maintenance fee”

► House: increases cap to $500

► Senate: increases cap to $600

Vehicle registration fee nearly doubled

Sales tax cap for boats, RVs, etc. increased

► House: increases cap to $500

► Senate: increases cap to $600

New biennial fee for fuel-efficient cars ($60-$120, depending on the type of car)

Property taxes for large commercial vehicles collected by DOR becomes a fee collected by DMV

The most significant change, however, is that both bills have reclassified taxes as fees and routed them through the Department of Motor Vehicles (DMV) rather than the Department of Revenue (DOR), thus making them eligible to be applied to pay down State Transportation Infrastructure Bank (STIB) bonds.

In fact, 80 percent of the “infrastructure maintenance fee” (formerly the vehicle sales tax) is made available for STIB bonding; the rest of the new revenue generated goes to a new “infrastructure maintenance trust fund” from which funds can be diverted to the State Highway Construction Debt Service Fund – and from there used for debt service on STIB bonds. All these transfers are almost certainly related to – and probably a result of – the debt authorized by last year’s bond bill.

The maneuver appears to be illegal. State code specifically defines a fee as follows: “’Service or user fee’ means a charge required to be paid in return for a particular government service or program made available to the payer that benefits the payer in some manner different from the members of the general public not paying the fee. ‘Service or user fee’ also includes ‘uniform service charges’” (emphasis added). Since literally every person in the state benefits from roads, calling the gasoline tax or the vehicle sales tax a “fee” in this sense is clearly disingenuous.

Where do the bills differ?

The elements under contention are not significant or meaningful. In short, the House version has some negligible structural reshuffling, while the Senate version contains a few convoluted and narrowly targeted tax “off-sets.” Neither bill makes the governor accountable for transportation funding, and both leave the Infrastructure Bank fully operational.

House DOT reform

The House reforms are these: (a) the DOT commission could be appointed by the governor upon advice and consent of General Assembly, not just Senate; (b) the Joint Transportation Review Committee would be abolished; (c) DOT commissioners would serve the governor at will (i.e. they could be fired); and (c) commissioners would not be permitted to serve in hold-over capacity past their term limits.

Although making commissioners at-will appointments may appear to be a step toward accountability, the existence of the commission itself is the problem. Policy decisions shouldn’t be made by a body of unelected commissioners but by the governor, who is himself accountable to the entire state.

Under the present system, whether the House version of this bill passes or not, the governor cannot exercise meaningful control over a board of eight legislatively approved appointees; the blame remains diffused among the DOT commissioners and a conglomeration of public officials and entities, with no one person being accountable for any one decision or policy.

Neither bill contained any meaningful transparency measures, either. The process for all state contracts for road construction, maintenance, or repair should be open to public inspection – no exceptions. While the Senate bill would require DOT to publish the agency’s statewide and countywide expenditure reports and contractor list, the public would still be kept in the dark as to how and why those particular projects were selected to begin with – arguably the most important part of the infrastructure funding process.

Senate tax “off-sets”

A brand-new $40 million tuition subsidy program in which college and tech school students could receive up to $2,750 apiece.

A new “preventative maintenance” cost rebate of up to 150 percent of gas tax paid – in order to receive this, the taxpayer would be required to save (a) all gas receipts and (b) all receipts from “preventative maintenance” on a vehicle (defined as “new tires, oil changes, regular vehicle maintenance, and the like”). All this documentation would be sent to the Department of Revenue on forms the agency would create, and the taxpayer would be refunded his preventative maintenance cost, up to 150 percent of his or her gas tax cost. This off-set is so cumbersome and complicated that it’s hard to imagine very many people actually taking advantage of it. The credit is capped at $390 million for all taxpayers.

A local business and manufacturing property tax cut subject to reductions, limits, and reimbursements by the state

Nonrefundable earned income tax credit of 250% of federal credit for low-income taxpayers – for instance, a taxpayer filing singly with no children would be eligible for this only if he makes less than $14,880.

Slight increase of two-wage earner income tax credit – the current credit equals seven-tenths of one percent multiplied by the lesser of $30,000 or the income of the lowest-earning spouse. This credit would increase the multiplier to $50,000.

All of these off-sets are complicated and narrowly-targeted, and they will make no real difference to taxpayers as a whole. While a gas tax bill is hardly the proper vehicle for tax reform, under no circumstances could the Senate’s proposal be called meaningful relief. Many taxpayers will not see any benefit at all and the few taxpayers who do benefit will do so at the expense of the rest.

What’s next?

The governor has stated his intent to veto the bill if it reaches his desk, which means the conference committee will need to find a compromise that both chambers can pass with a two-thirds majority in order to override the potential veto.

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