The Need to Index Gas Tax Revenues

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.”
. . .

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.

  1. 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.
  2. 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.
  3. 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.

Published by Will Brownsberger

Will Brownsberger is State Senator from the Second Suffolk and Middlesex District.

10 replies on “The Need to Index Gas Tax Revenues”

  1. Hi Will,

    I’m on the fence with this. I understand your point that other sales and income tax are naturally tied to inflation based on what they are taxing. However, that’s a consequence of what they are taxing. A law made to increase taxes without the due diligence of having to vote on that increase, borders on the line of taxation without representation.

    Could you provide some insight on how other states handle the increasing cost of maintaining their transportation infrastructure?

    Are there ways to write the bill so that the taxation rate can be looked at every 3 or 5 years and if needed, have a vote then to increase it?

    What are things that are currently under way that’ll reduce inefficiencies/better manage how we spend our tax dollars? Solely depending on new taxes to fund projects has an upper ceiling. The savings front should also be fully vetted out.

    Thanks for your time,

    1. MassDOT has very good engineers whose ethic really is to bring projects in on time and on budget. The reality is that the universe of good projects that need to be done is a lot bigger than the pot of money we have in place — so I’m generally in favor of more money for transportation infrastructure. There is a huge debate about how to provide those funds and states use a lot of different approaches, but the gas tax is pretty central.

  2. Thank for clarifying this question. I think it’s important to retain indexing for all the excellent reasons you give.

  3. Hi Will,

    You pose 3 arguments for why the gas tax should be increased every year based on the CPI. Even if one were to agree with these points (which frankly are weak at best), you have failed to make the case why you shouldn’t have to VOTE for the said increase each year. If the gas tax needs to increase every year based on inflation, then vote on said increase each year. If money is needed to pay for roads and bridges, this should be something you vote on, even if that means higher taxes in the short run. If you say you advocate for pay-as-you go, then advocate for it. I’m just sick of politicians unwilling to stand up for what they say they “advocate.” By voting for this automatic increase, you are doing the very opposite of supporting a system based on “pay-as-you-go.”
    Thank you,

  4. You are a good man, however on this point alone, you cannot get my vote. We fought a revolution regarding TAXATION WITHOUT REPRESENTATION over 200 years ago. If you cannot uphold your oath of office, you should not be in that office or any other government position.
    I will forward this reply and your article to all my friends and just hope they read it before going to the polls.

  5. We are about to have a vote on whether to index gas tax to inflation, yet two comments are calling this taxation without representation. Either I am confused or they are?

    Massachusetts wastes more money on construction projects because of useless police details. Although not all police details are useless, many are.

    I would site the example of trucking in sand to Winthrop Beach. Roughly 10% of the project cost is for police escorts.

  6. As to your first point, sales taxes do not increase as a percent of price. Overall prices increase over time although some items, such as electronics, tend to decrease in price. Income tax is also constant as a percent of income. Income tax revenues decreased during the recession because incomes decreased. The legislature can vote to increase the tax rate at any time but the tax rate does not automatically increase.

    The gas tax is levied on a per gallon basis (I never really understood why it is not done on a percentage basis). As cars become more fuel efficient the legislature might need to increase the tax as was done last year. It is important, however, that you vote to increase the tax each time you wish to do so and not impose automatic increases.

    You might even have to consider completely changing the way transportation infrastructure is funded. After all, you pay no gasoline tax if you drive a Nissan Leaf or a Tesla even though you are using the same infrastructure.

  7. So, the people have spoken on this — statewide the Yes vote prevailed, so the legislature’s action is repealed and the gas tax will not be indexed.

    In my own district, however, the question failed by the following margins.
    Belmont, 42-58
    Watertown, 46-54
    Boston, 43-57

    In other words, my district supported the legislature’s decision to index the gas tax. The politics of the gas tax in my district and in other close-in communities is different from the politics in rural and more suburban areas. The further people live from the central city areas, the more they drive and the more the gas tax is a burden for them.

  8. I’m still confused as to why the tax needs to be indexed to inflation if the price of gas is already (naturally) indexed to inflation.I also oppose any “automatic increase schemes” like this on the principle that it removes responsibility from government. There’s nothing in the gas-tax question that prevents adjustment, it simply means you need to take personal responsibility for it as a legislator. I don’t see anything wrong with that. Per other posters below I’d rather see (a) the money actually used on construction instead of as an offset to the general fund (b) the work done competently and efficiently (ie, lets get rid of the police details). BTW, $2mm per year is still on the table (get rid of front plates!). I know… good luck with any sanity prevailing there.

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