Senators consider historic gas tax increase

Brian Edwards

Minnesotans might have to shell out more money at gas pumps this summer if state lawmakers vote to raise the gas tax Monday
The state Senate, which is controlled by the Democratic-Farmer-Labor party, will vote on a 6.5 percent increase per gallon of fuel bought at wholesale. 
If passed and the House of Representatives agrees on a similar proposal, it would be the largest one-time increase in the state’s history. The new revenue would be used for highway repairs statewide.
Gov. Mark Dayton proposed a 6.5 percent gas tax increase in January as part of his far-reaching transportation plan to improve highway, road and bridge infrastructure.
But changing the state’s gasoline tax to fund transportation repairs has caused friction between legislators this session, though some University of Minnesota experts say it’s a short-term response to generating funds to cover transportation projects.
Adeel Lari, director of innovative financing in the State and Local Policy Program at the Humphrey School of Public Affairs, said the tax is levied against gas suppliers, but an increase would ultimately affect consumers.
“The profit margins on gasoline are very minimal,” Lari said. “The wholesalers will pass it on to the gas stations, and the gas stations pass it on to the consumers.”
The gas tax is currently 28.5 cents, and it hasn’t been raised since 2012. If lawmakers approve the increase this year, drivers can expect to pay at least an extra 16 cents.
Lari said gas taxes began a century ago as a replacement for toll bridges when driving became more popular in the state. Over time, legislators have revisited the tax and raised it in order to keep pace with inflation, he said.
Gerard McCullough, associate professor of applied economics said there are two criteria to determine the effectiveness of a gasoline tax: the perceived need and the rate of inflation.
McCullough said the tax should be used for restoration rather than the construction of new roads and bridges. 
In order to keep up with inflation, the Senate’s proposal states that the minimum amount taxed per gallon of gas would be 6.5 percent of $2.50. 
Lari said the threshold accounts for rising fuel costs, but a tax hike based off a percentage — like the 6.5 percent — can be volatile. 
It could also add to Minnesotan’s confusion about how gas is taxed, he said.
“People already don’t know how much they pay in gas taxes to build roads, and this will be even less transparent,” Lari said.
Alyssa Siems Roberson, communications director for the DFL Senate caucus, said she expects the bill to pass because the Senate approved a similar measure in 2013, under DFL-control. The House, which also had a DFL party majority at the time, did not hear the bill, she said.
Republicans have largely voiced opposition toward the proposed tax increase this year.
Sen. Julianne Ortman, R-Chanhassen, said gathering funds for roads could be done through different means, including using funds from the state’s nearly $2 billion surplus. 
Ortman said there are state dollars that could be shifted to cover the costs of repairs. She also said passing a bonding bill this year could help cover the expenses.
“It’s not a gas-tax-or-nothing situation for Minnesota,” Ortman said.
The Republican-controlled House approved a transportation funding bill last week that did not include the gas tax hike. Lawmakers have until May 18 to decide whether to approve a sales tax increase on gasoline.