Some Support Coming from Ames for Iowa Fuel Tax Increase

An 8- or 10-cent per gallon fuel tax hike may add to the bottom line, but it's also needed, a local truck mechanic said.

“I think we do need to raise it. We don't have enough money to fix the roads right now,” said Bill Roads, who commutes daily from home in Marshalltown to Ames for his job at .

Not everyone may feel like Roads, but momentum appears to be shifting to an increase in the state’s fuel tax to fund Iowa road repairs.

While some doubt it will muster enough support, a bipartisan group of legislators now predicts it will pass, and Iowa Gov. Terry Branstad, who had opposed it, now says he is willing to listen. Meanwhile, several economists suggest the tax is wise and needed and will be hardly noticed.

The details of the proposal are still being worked out, but officials are exploring a plan in which they would find $50 million in savings in the Iowa Department of Transportation and then consecutive 4- or 5-cent per gallon fuel tax increases, in 2013 and 2014. Iowa’s fuel tax is 21 cents per gallon for gasoline and 19 cents for ethanol-blended fuel. The tax was last increased in 1989.

Each 1-cent per gallon increase is expected to generate $22 million a year, meaning the increase would generate between $176 million and $220 million a year in additional revenue when fully phased-in.

In Ames gas prices were $3.09 at and $3.09 at on Monday.

Legislators Rallying Behind Small Gas Tax Increase

Speaking with the Associated Press, Sen. Tom Rielly, D-Oskaloosa and Rep. David Tjepkes, R-Gowrie, the co-chairs of the House and Senate Transportation Committees, which is behind the measure, said it is needed and said they expect it to pass, in part because of Branstad’s softening stance.

Sen. Herman Quirmbach, D-Ames, said he wouldn't be against a reasonable increase in fuel taxes.

“The cost of not repairing roads is pretty stupid if you think about it,” Quirmbach said.

He added that no one would notice a nickle increase.

Economist Say It’s Worth It

During a taping of Iowa Press and reported by the Associated Press, economist David Swenson said a 10-cent per gallon increase in the tax would cost the average family about $32 a year. Swenson and Creighton University economist Ernie Goss said the tax is worth it because roads are vital to Iowa’s economy the tax would be hardly noticed.

Increasing vehicle registration fees has also been discussed, but some say targeting the fuel tax is favorable because out of state users of Iowa roads would share the cost, as opposed to registration fees, in which Iowans alone would shoulder it.

Iowa State University Mechanics and Economics Professor Ross Morrow said he doubts an 8-cent increase would significantly change driving habits across Iowa.

“People tend to be very unresponsive to gas price increases, especially small and steady ones,” Morrow said.

John Solow, an economics associate professor at the University of Iowa Tippie College of Business, said a gas tax increase would have a negative, although limited, impact on Iowans.

Solow said those with low incomes who have commutes would suffer, and it could hurt the production and employment in Iowa, particularly for industries that rely on fuel and can’t pass the hike along to their customer.

Still, he said the tax may be the most fair way to address road maintenance needs.

“Using gas tax revenue to maintain roads fits with what is called the "benefits principle" of taxation,” Solow said. “(This) is the idea that those who benefit from the expenditure should bear its cost, but it does so only loosely, in that the correlation between gasoline purchases and benefits from road use is not perfect.”

Can It Pass In An Election Year?

As with most things in the Legislature, it will depend on politics.

An advocacy group from Muscatine called Iowans for Tax Relief has urged the Iowa Legislature not to raise the gas tax “at a time when gasoline prices are predicted to spike,” and asked Iowans to contact their legislators to encourage them to oppose a bill if it is introduced.

The Farm Bureau, along with some cities, counties and labor groups, support the increase. Citing a state survey, the Cedar Rapids Gazette reported the state needs about $215 million to address "critical" infrastructure needs.

Christopher Larimer, political science professor at the University of Northern Iowa, questioned how strong the support would be during an election year, but said with Branstad’s support and if the economy continues to recover it may slide through.

"(It's) tricky. On one hand, in an election year you never want to vote for a tax,” Larimer said. “On the other hand, if you ask Iowans all over the state they’ll tell you the infrastructure needs work. It seems like every week we’re hearing about old roads that are falling apart.”

Roads said he doesn't mind the increase. He used to drive to Des Moines where he worked at the airport.

“It's all part of doing business I guess,” Roads said.

Morrow, who drives a second generation Honda Insight, wouldn't be opposed to the increase himself but noted that the increase could affect certain groups of the population, particularly those with low incomes. 

“Personally speaking I'm willing to pay more for how much driving I do. If it was up to a referendum I would vote yes.”