Pennsylvania Gov. Tom Corbett this week proposed a 25-cent tax increase on gasoline over the next five years, joining a group of at least 13 state governments that have turned to tax increases as a potential means to pay for transportation projects.
Projected to create $510 million in extra revenue next year, Corbett’s plan would raise the gas tax by 5 cents annually, eventually producing $1.8 billion a year when the increases would stop in 2018.
Most of the extra funding would go toward repairing the state’s roads and bridges. The amount of Pennsylvania roadway in poor condition has increased by 2,500 miles in the last five years, going from 7,500 miles in 2007 to 10,000 miles as of last year. More than 4,000 bridges in the state have been deemed “structurally deficient.”
The Southeastern Pennsylvania Transportation Authority (SEPTA), the largest mass transit system in the state, would also receive extra funding under Corbett’s tax increase. SEPTA, the nation’s sixth busiest transit system, has a long history of being underfunded by the state and faces a $38 million budget gap for the next fiscal year.
According to the think tank Transportation for America, state-level needs for transportation funding from the federal government grew by 47 percent between 2006 and 2009, while the actual federal funding for transportation grew by only 14 percent during the same time period.
Gas tax increases generally meet ample political barriers, especially with the news that gas prices have risen by 17 cents nationwide in the last week. According to the National Conference of State Legislatures, 14 states haven’t raised their gas tax rate in more than 20 years.
However, higher gas taxes may benefit not only a state’s budget, but its economy as well. According to a recent study by the National Bureau of Economic Research, “Higher gasoline taxes encourage work, and when this effect is taken into account, the optimal gasoline tax is substantially higher than previous research has suggested.”
In other words, the study suggests that gas taxes in most states may not be high enough. The report goes on to state that, “Raising the gasoline tax thus has the triple benefit of lowering fuel consumption, decreasing pollution, and providing an incentive for people to work at a more socially optimal level.”
This idea contrasts with a proposal by Virginia Gov. Bob McDonnell to eliminate the gas tax but increase the sales tax to make up for lost revenue. According to the NBER study, sales tax increases don’t have the same effect as an increase on gas taxes, and “[t]axes on specific consumer goods often discourage work by even more than the income tax does.”
Massachusetts Gov. Deval Patrick has proposed raising gas taxes as part of his plan to add $1.02 billion a year to the state’s transportation budget. The 30-cent-per-gallon increase would be part of Patrick’s plan to balance highway and transit budgets while also reducing the debt of the Massachusetts Bay Transportation Authority (MBTA).
As in Pennsylvania, the transportation infrastructure in Massachusetts is in need of critical upgrades and repairs. And like SEPTA, the MBTA — the nation’s fifth busiest transportation agency, ranking just above SEPTA in total ridership, and the largest in Massachusetts — faces an operating budget shortfall, with a projected $40 million budget gap next year.
According to Transportation for America, public transit ridership levels are at their highest in 60 years. Yet most agencies continue to struggle financially, resulting in fare increases, service cuts and layoffs.
In an attempt to reduce its debt, the MBTA has proposed fare increases along with cuts to bus routes and the elimination of ferry services.