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User fees are smartest revenue sources for roads

Margaret Donahoe//May 13, 2015//

User fees are smartest revenue sources for roads

Margaret Donahoe//May 13, 2015//

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Margaret Donahoe
Margaret Donahoe

There are good commentaries, bad commentaries and those that are just plain wrong.

David Strom’s commentary on a wholesale tax on gasoline (Capitol Report, May 11, Page 7) is so full of inaccuracies it begs for correction.

Minnesota already has a wholesale tax on gasoline. The current fuel tax is collected at the wholesale level from fuel distributors by the state. That would not change at all under the proposals being discussed at the Legislature.

Transportation funding has long been tied to oil because voters have decided that user fees are important, and the fact that the more you drive the more fuel you buy makes the current fuel tax a user fee. Industries that ship products frequently with heavy trucks pay more. People think that’s a fair way to pay for roads and bridges and have voted to dedicate that revenue to highways and bridges in the Minnesota Constitution.

Gov. Mark Dayton and Senate Democrats have recognized the problems pointed out by Mr. Strom — namely that fuel consumption will decrease in the future and the current per-gallon fuel tax will not be able to keep up with inflation and growing demands on the system as 1 million more people move into Minnesota. They have proposed a gross receipts tax, which does fit the constitutional language requiring a tax on the business of selling fuel to be deposited in the Highway Trust Fund and the proceeds used solely for a highway purpose. The proposal would simply require the Department of Revenue to adjust the current fuel tax once a year based on the annual wholesale price of fuel. Just like every other sales tax used by the state and local governments, structuring the fee as a percentage of the price means the revenue will increase with inflation. That’s important for road building, an activity that becomes more expensive as oil and other material costs increase.

The cost to the average driver would be minimal — the equivalent of the cost of a cup of coffee each week — over the course of a year. We all would benefit from better roads, less congestion and safer bridges when the state has a dependable, sustainable source of revenue that keeps up with inflation to pay for those investments.

One thing is correct in Mr. Strom’s commentary: One Legislature cannot bind another, and future legislators may make different decisions. This is precisely why statutorily dedicating revenue streams may not last beyond the current Legislature. Constitutionally dedicated revenue sources are the only ones that have to be deposited in the Highway Trust Fund. Other revenue can easily be diverted to other purposes whenever the state faces a general fund deficit.

The governor and leaders of both the House and Senate agree that our transportation system is critical for our economic growth and success and that the state needs to increase its investment in our deteriorating infrastructure. Constitutionally dedicated user fees are the smartest revenue sources to rely on as leaders seek to improve safety and mobility for the future.

Margaret Donahoe is executive director of the Minnesota Transportation Alliance.

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