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Aggregating Energy Since 2006

Gas Tax Increase in MN

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Gas tax graphicThe Star Tribune had an article today about the legislation proposed by Sen. Steve Murphy, DFL-Red Wing, to increase sales taxes on gasoline in Minnesota. It has been inserted as part of the transportation bill being voted on by the Senate today. The proposal aims to more than double the state's gasoline tax from the current $0.20/gallon to over $0.40/gallon in 10 years.

The merits of this and increased vehicle efficiency standards have been discussed on this list in the past at:

http://energista.org/node/347

http://energista.org/node/214

While I support increasing the cost of doing business as usual as a way to influence consumer behavior I am skeptical about this proposal. First, it contains only a small funding connection to increasing viable alternatives to the behavior being disincentivised. Second, it does not contain provisions to reducing the disparate impacts on those who do not have alternative transportation modes available. For instance, rebates to offset price differentials for higher efficiency vehicles for use by small businesses and in rural areas.

Last, this bill is a huge bucket of new and increased taxes. From the article,

The bill also includes these other levies, all dedicated to roads, bridges and transit:

• Higher registration renewal fees on future new car purchases, but no increases on currently owned vehicles.

• A half-cent rise in the general sales tax in the seven-county Twin Cities area, imposed without a voter referendum, plus a $20 excise tax on new vehicle sales in the metro.

• Local-option authority for half-cent sales-tax increases in the rest of Minnesota, subject to voter approval.

• Authority for all 87 counties in the state to impose a $20-per-vehicle annual wheelage tax. Three suburban counties levied the current maximum of $5 per vehicle last year.

• Increased fees for leased vehicle registrations, license plates, titles and drivers' licenses, plus a $20 reinstatement fee for a license suspended for theft of gasoline.

I think this is ultimately makes it a very difficult bill to swallow politically. The Governor has indicated a willingness to veto increased taxes. The committee vote was split along party lines. Plus, this will make it more difficult for the DFL leadership to pull along support within their own ranks; particularly in the House.

Incidentally, the Governor's proposal is even worse. He wants to borrow more money to fund a more limited number of projects.

Republican Gov. Tim Pawlenty's own no-new-tax transportation plan calls for $1.7 billion in borrowing over 10 years to accelerate more than two dozen highway projects. The money would be paid back mostly via a transfer of existing motor vehicle sales taxes to roads and transit authorized by voters in November.