8 Ways to Increase Highway Funding
Lots of possible taxes and fees, but can legislators agree on any?
Your assignment, Mr. and Ms. Wisconsin Driver, is to decide how to raise an additional $500 million by mid-2021 to maintain highways and streets you have watched break down.
It’s a timely request, since Gov. Tony Evers will recommend a two-year transportation funding plan in the 2019-21 budget he gives lawmakers Feb. 28. It will decide how quickly, or how slowly, I-39/90 is finished from Madison to the Illinois border.
Evers will get recommendations from state Transportation Secretary Craig Thompson, who has met with 34 leaders of special-interest groups about breaking the six-year Capitol deadlock on transportation funding.
In a WisconsinEye interview, Thompson estimated the two-year shortfall just to maintain state highways – not including Interstate highways, bridges and bus systems – at between $360 million and $400 million.
So, let’s assume the Transportation Fund needs an additional $500 million by mid-2021 for you to see any improvement.
To help you get to $500 million, what follows are some “revenue raising” options. Legislators who don’t see a major problem with the highways fund debt call them “tax increases.”
1. 5-cent per gallon increase in the state gas tax, which has been 30.9-cents since 2006: +$165 million per year.
A 5-cent hike in the gas tax bring more cash immediately, and recent drops in gas prices may mean it might not be as painful at the pump. But it’s still – see those legislators preparing to vote no – a “tax increase.”
In January’s Marquette University Law School Poll, 52 percent of respondents were against a gas-tax increase, and 42 percent in favor. But, Thompson noted, the same poll last year found 62 percent against – a change he calls progress.
State Department of Transportation (DOT) officials say a 5-cent gas tax increase would cost the owner of a passenger car driven 8,000 miles a year, or an SUV driven 12,000 miles a year, $40 more per year.
2. Raising the $75 annual vehicle registration fee, unchanged since 2008, by $10: +$47 million a year.
This change would also bring in more cash to maintain and rebuild highways quickly, and state officials say our $75 fee is the lowest in the region. Still, read the lips of opponents: “Tax increase!”
State officials say Wisconsin has the lowest “cost of vehicle ownership” of neighboring states. Their example: a Milwaukee resident with a 2016 model car pays about $294 per year to register and operate it. The owner of that same car in Des Moines, Iowa, pays $326 per year.
3. Eliminate the “trade in” sales tax exemption when you buy a newer car: +$87 million a year, but not until 2022.
DOT officials say 42 states have the “trade in” sales tax exemption, although Michigan does not. But imagine, if your trade-in vehicle’s value is $6,000, having to pay $330 more – the 5 percent state sales tax and 0.5% local sales tax – if that exemption is eliminated.
4. “New car” value-based registration fees: +$49 million a year, but not until 2022.
Iowa, Michigan and Minnesota base annual car registration fees on a new vehicle’s purchase price. The argument: The tax is progressive, because someone buying a new $70,000 Mercedes should pay more than someone buying a new $29,000 Toyota.
But, DOT officials note, phasing in this change means not much new cash by mid-2021, and it would be a “challenge” to implement.
5. Miles-traveled surtax for someone driving more 3,000 miles a year: +$325 million a year, but not until 2022.
Under this system, vehicle owners would self-report how many more miles than 3,000 they drove in a year, and pay a 1-cent surtax per mile on the difference. But Republican Sen. Howard Marklein, whose southwest Wisconsin district includes many residents commuting to jobs in Iowa and Illinois, said that would unfairly tax them for miles driven in neighboring states.
Thompson said that is a fair criticism.
If those large numbers are too much for you, here are two changes that raise less cash: (6) Every $1 increase in the $69.50 fee to title a vehicle for the first time raises $1.5 million per year. And, (7) eliminating the “evaporation” deduction going to gas suppliers for loss of product, which was enacted decades ago and may no longer be justified because of improvements in technology, raises $13 million per year.
But Thompson said tolling could not start for years because the federal government must approve it and Interstate highways would have to be reconfigured to add toll booths.
Drivers need to see improvements soon, Thompson added. Tolling “could be a long-term solution, but we have a ‘right now’ problem.”