Midwestern Governors Push Major Gas Tax Hikes

Published May 24, 2019

Citing pressing transportation needs, three Midwestern governors – two Democrats and one Republican – are calling for significant gas tax hikes in their states.

If the governors get their way, drivers in Michigan, Minnesota, and Ohio will soon be paying significantly higher gas taxes at the pump.

Ohio, Republican Gov. Mike DeWine has proposed raising the tax by 18 cents a gallon. That would be in addition to the 28 cents a gallon drivers in the Buckeye State currently pay.

Minnesota’s Democratic-Farmer-Labor Gov. Tim Walz has proposed increasing his state’s gas tax by 20 cents a gallon, double the amount he proposed during his 2018 election campaign. This would boost Minnesota’s gas tax to 48.6 cents per gallon.

Michigan’s Gov. Gretchen Whitmer (D) has proposed the largest gas tax increase of the three governors; 45 cents a gallon, phased in over the course of a year, beginning October 2019. Whitmer’s plan would result in Michigan drivers paying 71.4 cents a gallon in gas taxes, the highest gas tax in the country.

All three states’ tax hikes would come on top of the federal gas tax of 18.4 cents per gallon, a rate that has remained unchanged since 1993.

Seeking Additional Highway Funding

Each of the three Midwestern governors proposing gas tax hikes argue new revenue is needed to maintain and expand roads, bridges, and associated transportation infrastructure across their states. Gas tax revenues have failed to keep pace with transportation infrastructure costs as average vehicle fuel economy has increased substantially over the past decade, and as federal and state subsidies have contributed to an increasing number of electric, or electric hybrid vehicles – which avoid traditional gas taxes – taking to the roads.

Ohio last raised its gas tax in 2006 and has seen revenues generated by the tax gradually diminished by inflation and the increased fuel efficiency of cars and trucks. But the matter remains politically touchy, with Republicans, who control both the House and the Senate, having pledged to seek tax relief, not hikes.

Minnesota and Michigan on the Gas Tax

In assessing Minnesota’s need to raise its gas tax, Walz cited estimates provided by civil engineers and the state Transportation Department who concluded Minnesota would need $19 billion over the next 20 years to maintain the current system, adjusting for growth in population.

In Minnesota, the Democratic Farmer Labor party controls the House of Representatives, while Republicans hold a majority in the Senate. To encourage legislators who might otherwise be opposed to raising gas taxes to support his proposal, Walz has suggested some of the revenues from the gas-tax hike could go to bike paths and transit system. Recognizing a gas tax is regressive, Walz has also floated the idea of a providing tax break for low-income families, to “take the sting out of the gas tax.”

In her successful 2018 campaign for governor, Michigan’s Whitmer pledged to “fix the damn roads,” but was vague on how the fix would be financed.

“We have the worst roads in the country and I am proposing a plan that will permanently fix our roads while keeping the costs fair for seniors and low-income families,” Whitmer said when she submitted her budget proposal. “I know this won’t be easy, but with one historic vote we can make the investments that are necessary.”

Legislature Unlikely to Go Along

Whitmer plan is dead on arrival in the state’s Republican-controlled legislature, says House Speaker Lee Chatfield.

“Unfortunately, the proposal she put forward is a nonstarter in my caucus, because the people in our districts cannot afford it,” said Chatfield in a discussion with reporters on March 7. “So the gas tax will not be raised 45 cents.”

The proposed gas tax hikes leave relatively wealthy drivers of subsidized electric vehicles (EV) unscathed, even though their cars use the same highways, notes Dan Kish, a senior fellow at the Institute for Energy Research.

“Rich EV drivers are leaching off everyone else – through tax credits, subsidies, and carbon credits, and utilities want us to pay them – with a guaranteed rate of return – to put in ‘electric gas stations’ so they can sell more electricity,” said Kish. “Now politicians want to jack up the gas tax so EV drivers will have better roads to drive; roads they don’t help pay for or maintain. “Meanwhile, two-thirds of regular Americans are buying SUVs and trucks, and politicians want to stick them with the bill,” Kish said. “Americans might just have to don yellow vests, like they have in Europe, in protest.”

Because gas taxes are too often diverted to other non-road purposes, it is unclear increased gas taxes will fix the infrastructure problem states face, says Craig Rucker, president of the Committee for a Constructive Tomorrow (CFACT).

“How much of the money raised through gas-tax hikes would actually go to fix the roads?” asks Rucker. “Money is fungible and can be diverted to such things as bike paths, roundabouts, light rail, and other pet projects of state transportation departments.

“Unless there are iron-clad guarantees the new revenues will be spent maintaining and improving highway infrastructure, the gas-tax hikes will be another scam, with taxpayers left holding the bag,” Rucker said.

Bonner R. Cohen, Ph.D. ([email protected]) is a senior fellow at the National Center for Public Policy Research and a senior policy analyst with CFACT.