Feb 21, 2015 9:21 AM

Alternative ways to pay for highway repairs, construction

The Associated Press

JEFFERSON CITY, Mo. (AP) For nearly a century, the gasoline tax has provided the financial foundation for the nation's roads. For each gallon they pump, motorists have paid several additional cents in taxes to their state and federal governments.

That is still the case in most places. But as vehicles have become more fuel-efficient, gas tax revenue has plateaued. And the federal gas tax has lost more than one-third of its value to inflation since it was last raised to 18.4 cents a gallon in 1993.

As a result, state and federal officials are increasingly looking for alternatives to help pay for repairs and improvements to highways. Here's a look at some of those ideas:



Rather than taxing each gallon of gas pumped, some states have begun levying a tax on the wholesale price. Virginia in 2013 repealed its 17.5-cents-a-gallon gas tax and replaced it with a 3.5 percent wholesale tax on gasoline. Minnesota Gov. Mark Dayton recently proposed a wholesale tax that would be in addition to the state's current per-gallon tax. Because of price swings, wholesale tax revenue can vary from year to year. But over the long term, supporters believe it could provide more revenue growth than a flat, per-gallon tax.



Some states have begun funding highway projects by taxing all retail sales. Arkansas voters in 2012 approved a half cent sales tax hike for highways. Michigan voters will decide in May whether to impose a 1-cent sales tax for transportation. Because they are broad-based, retail sales taxes can generate large sums for highways. But opponents note that sales taxes tend to have a larger proportional effect on lower-income residents. Missouri voters last August defeated a proposed sales tax increase for transportation.



A tax on the number of miles traveled is one of the most commonly discussed alternatives to fuel taxes but has not been widely implemented. Oregon plans to test the concept this July with 5,000 volunteers, who will be charged 1.5 cents for each mile they drive while getting a refund on their gas taxes. The vehicle mileage tax also has been studied in California, Minnesota and Nevada. Its main obstacle has been privacy concerns from people reluctant to have their vehicles tracked with GPS devices.



Toll roads have been around for decades but are receiving renewed interest in some places. Delaware raised toll prices last year after lawmakers rejected the governor's proposed gasoline tax increase. Governors in Connecticut and Missouri also recently cited the potential for tolls. But to pay for major projects, tolls might have to be expensive. One study found that covering the cost of rebuilding a 200-mile stretch of Interstate 70 in Missouri could mean tolls as high as $30 per car and $90 for heavy trucks.



Some states are turning to private investors to help finance big projects that otherwise would be out of reach. In December, Virginia opened a 29-miles stretch of express toll lanes on Interstate 95 outside Washington, D.C. The state provided less than 10 percent of the money for the $925 million project. Private entities invested their own money, secured a federal loan and made use of tax-exempt bonds. In exchange, Virginia gave them the right to manage the road and collect tolls for the next 73 years.



Rather than raising taxes, some states are redirecting existing revenue to roads. Idaho last year shifted part of its cigarette tax revenue to highways. Texas voters in November approved the transfer of a portion of oil and gas severance taxes from the state's rainy day fund to roads. Some states have increased vehicle registration fees. Washington has imposed fees on owners of electric vehicles, and Gov. Jay Inslee recently proposed a carbon-emissions tax on the state's largest polluters that would help finance transportation projects. He describes it as "transportation pollution paying for transportation solutions."



Various proposals from President Barack Obama and U.S. Senate and House members would help finance the federal Highway Trust Fund with taxes on the foreign-earned profits of U.S. corporations. Some proposals also would create a $50 billion infrastructure fund, to be financed by selling bonds to private companies or by taxes on foreign profits. Such a fund could be used to make equity investments and loans for state and local infrastructure projects.

Separately, the nonprofit Eno Center for Transportation suggested in December that the federal government stop relying on dedicated fuel taxes, abolish its current Highway Trust Fund and instead pay for roads with general tax revenue.


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