Tom Still column No. 76-05
“Gas-tax indexing repeal reflects changing economic times”
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By Tom Still
MADISON – Not that the baby was especially pretty, but I witnessed the birth of Wisconsin’s “indexed” gasoline tax. Now that Gov. Jim Doyle has agreed to sign a repeal bill, it’s worth remembering why the tax was approved two decades ago.
It was early in the 1982 campaign for governor, and two primary candidates from opposing parties – Democrat Tony Earl and Republican Lowell Jackson – agreed to hold a series of one-on-one debates. The idea was simple enough: Talk about emerging issues facing Wisconsin, which was mired in the worst economic downturn since the Depression, and garner some pre-primary attention. As a reporter, I covered those debates because … well, frankly, it was a “man-bites-dog” story. At the time, candidates from opposite parties rarely, if ever, debated during primary season.
Jackson, a professional engineer, contended a mix of hard times and inflation were drying up funds for repair and construction of Wisconsin roads. Worse yet, Jackson predicted, road conditions and stalled projects would soon impair Wisconsin’s ability to emerge from the recession. If the highways aren’t conducive to commerce, he argued, businesses and farmers cannot get goods and services to market. His solution: “Index” gasoline taxes to inflation and use, which meant taxes could rise and (theoretically) fall year to year.
Earl, a former secretary of the state Department of Natural Resources, wasn’t exactly a fan of pouring more concrete and asphalt – but he also recognized the near-emergency and the difficulty of convincing lawmakers and citizens to approve gas tax increases on an “as-needed” basis. With unemployment at double-digit levels, however, raising taxes the conventional way would be a very tough sell.
The election wore on. Jackson lost in the Republican primary to Terry Kohler, but his idea lived on through Earl, who had slowly come to like the idea of a formula-driven tax. When Earl defeated Kohler in November 1982, he appointed Jackson to run the state Department of Transportation, and a bipartisan platform for indexing the gasoline tax was created. The Legislature soon embraced the idea.
Fast-forward ahead 20-plus years. Gasoline prices have skyrocketed, and the indexing formula is taking extra pennies out of taxpayer wallets. A system that worked relatively well when gas prices were stable became a hidden tax increase when supply-and-demand nearly doubled prices.
Since 1984, the Wisconsin gas tax – among the nation’s highest – has increased April 1 of each year due to the indexing formula. The tax is scheduled to go up 0.8 of a cent a gallon in 2006. The bill to be signed by Doyle will end the practice after that increase, requiring lawmakers to take a vote any time they want to increase the tax.
How much will it save motorists? According to AAA Wisconsin, the average family with two vehicles averages 22 miles per gallon on both cars. If each vehicle is driven 12,000 miles in a year, wiping out the 2007 increase would save that family $6.55 in the first year.
It also would cut $5.1 million from the $3.2 billion transportation fund in the current two-year budget that ends in mid-2007. The price tag will grow to more than $80 million by mid-2009. Wisconsin’s gas tax is now 29.9 cents a gallon plus 3 cents a gallon tacked on for the Petroleum Environmental Cleanup Fund Award; lawmakers and the governor have already approved cutting a penny from that portion of the tax.
The repeal of the indexed gas tax seems to be more about principle than dollars-and-cents. With gasoline prices spiking, some politicians – Doyle included – have chosen to focus of alleged “gouging.” Others, such as Republican lawmakers, have been quick to point out that taxes are a significant chunk of what consumers pay at the pump.
Either way, the indexing formula had probably run its course. Times have changed, and other infrastructure priorities are competing for state tax dollars. For example, some policymakers may believe economic growth in the 21st century is better served by investment in high-tech communications – the “information superhighway” – than automatic increases in transportation taxes.
Repealing the gas indexing formula makes sense in terms of accountability, but future governors and Legislatures will need to keep their ear to the road – almost literally – about if and when tax increases are needed. Without automatic tax increases, some tough choices may be ahead for Wisconsin’s transportation system.
Still is president of the Wisconsin Technology Council. He is the former associate editor of the WisconsinState Journal.