Sunday, December 04, 2005

Is gas tax indexing needed in Wisconsin?
A flagrant act of something

According to Wisconsin’s
DOT, motor fuel tax indexing is needed because (my emphasis added):

Indexing inflation-proofs Wisconsin's gas tax

  • The largest source of revenue for the Transportation Fund is the state gas tax.
  • Unlike sales tax and income tax revenues, which both go into the General Fund, there is no natural growth in state gas tax revenue.
    o The flat “per gallon” rate does not change, even as the price of gasoline rises.
  • To help transportation revenue grow with the economy, the Legislature created an annual indexing adjustment beginning in 1985.
  • Indexing originally called for the state gas tax to be adjusted annually on April 1 based on inflation and overall fuel consumption.
    o In 1997, the Legislature removed the consumption factor.
  • Indexing is now based on changes in the Consumer Price Index.
    o Sometimes indexing can result in an adjustment downward, which leads to a reduction in the state gas tax. This occurred in 1989 and 1994.
    o While indexing usually increases the gas tax rate slightly, the difference is minor when compared to frequent price jumps at the gas pump.
I had my doubts about "no index = no tax growth." I know for a fact that since 1985: I am driving more; I have more drivers in my household; I am driving less efficient vehicles (I sure miss that Renault Encore); and I’m driving faster, hence burning even more fuel. I am fairly certain that the same holds true for the majority of Americans, and made the following statement before any research:

I think the automatic rate increase is only a small piece of the equation, because more drivers are driving more miles in less efficient vehicles. I am confident that the amount of taxes collected has increased dramatically more than the gas tax indexing would indicate. I also suspect that these numbers are kept hidden to suppress an even larger taxpayer revolt.

A look at the facts. According to DOT (see Table 1 on page 2), total motor fuel tax revenues were $528 Million in 1990 and the motor fuel tax was adjusted to $0.215/gallon on April 1 of that year. They also say that in 2005, the motor fuel tax was adjusted to $0.299/gallon. That is a large increase (39.1%), and has resulted in an additional $206M in revenues for 2005 versus 1990, for a total of $735M. I will admit that this is not unreasonable, an increase of about 40% is needed to “help transportation revenue grow with the economy” especially since “there is no natural growth in state gas tax revenue.”

A look at the rest of the facts. Looking further, I find DOT stating that revenues for 2005 are $984M, not the $735M I computed. Where did that additional $250M come from? Perhaps the result of “more drivers are driving more miles in less efficient vehicles.”

THE BIG LIE. DOT says that there is no natural growth in state gas tax revenue. This is not spin, it is contrary to their own facts. DOT’s data show that motor fuel revenues would have grown from $528M in 1990 to $778M in 2005 without any indexing of motor fuel taxes. That is an increase of 47.3%. This increase due to natural growth is more than the increase of motor fuel tax revenues due to indexing
and greater than the rate of inflation. DOT hid this fact and misled the public in their 2005 Press Release, even with 20 years of their own tax collection data available.

We’ve been duped and lied to. I expect better from my public servants (yes, even Jim Doyle and his administration). Here’s my other idea from yesterday:

Here's a crazy proposal, index gas taxes collected to inflation. If state collections increase faster than inflation, reduce the gas tax for the following year. Watch the roadbuilders and their legislative whores gag on that one.
After reviewing the data, that proposal is overly conservative. I've revised it to something more reasonable:

The motor fuel tax shall be rolled back to a level such that total tax revenues for 2005 will equate to an increase of 39.1% over 1990 revenues.

By my computations, a decrease in the fuel tax from $0.299 to $0.178 per gallon will accomplish this.

Let the revolt begin.

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