There is a strong consensus, built through much study and discussion over the past decade, that we need to spend more on roads, bridges and public transportation. In the last legislative session, I worked hard for a tax package dedicated to these needed investments.
In 2013, we made a big step forward, although we didn’t go as far as I felt we needed to. We passed a package including an increase in the gas tax by 3 cents from 21 cents per gallon to 24 cents per gallon. And we indexed the gas tax to inflation. This thread offers more on the whole history of the issue.
On the ballot this year is a question that would repeal the indexing of the gax tax to inflation. The question reads as follows — it would let stand the gas tax increase, but repeal the indexing.:
SECTION 1. Section 1 of chapter 64A of the General Laws is hereby amended by striking out, in the definition of “tax per gallon”, the following words:-, “adjusted at the beginning of each calendar year, by the percentage, if any, by which the Consumer Price Index for the preceding year exceeds the Consumer Price Index for the calendar year that ends before such preceding year; provided, that the Consumer Price Index for any calendar year shall be as defined in section 1 of the Internal Revenue Code pursuant to 26 U.S.C. section 1; provided further, that the tax shall not be less than 21.5 cents per gallon.”
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Under Article CIV of our constitution, the gas tax is dedicated by law to highway and transit maintenance and improvements. Needless to say, I am opposed to anything that would reduce current or future revenues dedicated to these purposes. But I want to emphasize three particular reasons why I supported the gas tax indexing as a legislator.
- First, our other state taxes — sales and income — naturally grow with inflation because they are tied to money prices — they are indexed automatically. It makes perfect sense for taxes to remain proportionate to the pricing of goods in the economy. Since the gas tax is levied on a per gallon basis, instead of on a per dollar basis, there is a need to index it just to keep it inline.
- Many believe that gas tax revenues will naturally drift downwards as automobiles become more efficient as mandated by federal law. If the gas tax is not indexed, it will doubly dwindle in value, through inflation and through actual consumption reduction. But the roads and bridges won’t get any cheaper to maintain.
- Most importantly, to support a program of investment financed by borrowing, one needs to have escalating revenues over the next ten years. In the long term plan we debated last year, I was most concerned to increase revenues in the out-years in the 10 year funding plan — meaning in 2020, 2021, etc.. — as opposed to the immediate revenues. Here is why: Most transportation investments occur over a multi-year period. Each year, as funds are needed to pay for construction, the state does the necessary long-term borrowing to supply those funds. As the state increases outstanding indebtedness, the cost of servicing that debt goes up. If you don’t allow for that, you can’t finish the projects that you start.
One might argue that it would be better to fund out transportation projects on a pay as you go basis, rather than borrowing. In fact, I’ve advocated for that. But if we were to do that, we would need to increase taxes much more in the short run.