Proposal uses existing taxes to fund highways

Proposal uses existing taxes to fund highways
Sen. Phil Fortunato (R-31) has proposed a bill that would shift vehicle sales tax revenue from the general fund into the constitutionally protected motor vehicle fund to pay for highway projects. Photo: freepik.com

A major priority for Washington state is not only infrastructure funding to meet existing transportation demands, but also maintaining the revenue streams that finance those projects. Senate Transportation Chair Steve Hobbs (D-44) has proposed a $16 billion transportation budget that includes a $15 carbon tax that would help pay for fish barrier removal projects.

At the same time, Senate Transportation member Sen. Phil Fortunato (R-31) is pitching separate legislation that would redirect revenue generated by the motor vehicle sales tax used to cover operating budget spending into an account that can only be used for highway funding. However, remarks made by Hobbs at a Feb. 19 public hearing suggested that despite the idea’s merits, political realities make it unlikely the proposal will earn the needed approval of the Senate Ways and Means Committee.

Nevertheless, Fortunato argued that his plan helps address funding issues with existing tax revenue. “We need to develop a plan to address long-term funding issues that are linked to inflation. If we don’t have a funding source that is linked to inflation, we need to have something that is going to go up without us introducing a new tax.”

The state currently imposes a 6.5 percent tax on automobile sales, which is deposited into the general fund. Under SB 5743, starting in 2020 that revenue would instead go into the motor vehicle fund, the same account that the state gas tax revenue goes. Under the 18th Amendment to the state Constitution, money in that account can only be spent on highways. The bill’s plan is also articulated in SJR  8206, which would send a proposed constitutional amendment to Washington voters for approval.

If enacted, the proposal would provide $15 billion over the next 10 years in additional transportation funding, and $37 billion in 20 years. “That’s going to result in an increase in revenue much greater than the increase in gas tax revenue that we can expect,” Fortunato said.

The proposal is similar to a provision in the transportation budget Hobbs proposed that would increase the sales tax on auto parts by one percent and use that new revenue for highway purposes (page 5).

Right now, the state is also floating the idea of a road user charge (RUC) fee to replace the gas tax. A pilot program run by the Washington State Transportation Commission (WSTC) recently concluded, with a report due to the legislature next January. The program is intended to examine potential strengths and weaknesses of various tracking methods ranging from an odometer reading to a smartphone app.

Yet, any proposal would have to address issues such as high administrative costs, privacy and personal data security, distinguishing mileage driven out of state, as well as ensuring the revenue is also constitutionally protected.

While the Department of Revenue doesn’t break out the administrative costs associated with the motor vehicle sales tax from other taxes it collects, the overall costs are low.

Meanwhile, drivers who fill up in Washington state pay the third highest gas tax per gallon in the nation of roughly $.50, — $.678 when combined with the federal gas tax. The proposed transportation budget’s $15 carbon tax would increase gas prices by approximately $.13.

Fortunato says using motor vehicle sales tax money, which increases as car prices go up, avoids burdening taxpayers further to pay for highway projects. “At some point in time, you have to admit people are paying enough taxes. If you’re going to go to hell in handbasket, you might as well go on nicely paved roads.”

However, Sen. Dean Takko (D-19) asked Fortunato how they would replace the $1.5 billion per biennium that would otherwise be kept in the general fund. “You’re going to support a capital gains tax?” he joked.

Fortunato pointed to the billions in surplus revenue that the state has received in recent years, though the legislature has still dipped into the budget stabilization account and a local infrastructure revolving loan program to pay for new spending.

“When I look at the general fund and the evil committee on the other side – Ways and Means – I  see a committee that is constantly offloading general fund obligations,” Fortunato said.

Hobbs concluded the public hearing on a lightly sardonic note, telling Fortunato “you’re probably right, but you know? We’re probably never going to get it (bill) out of that other (Ways and Means) committee.”

No further action is scheduled for either bill at this time.

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