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South Dakota Governor Proposes Perpetual Gas Tax Increase

Gov. Dennis Daugaard, who pledged not to raise taxes during his first term, proposed in his state of the state to increase the state gas tax two cents on July 1, and then two cents a year thereafter, to fund state and local roads and bridge repairs.
January 18, 2015, 11am PST | Irvin Dawid
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"I don’t want to leave this problem to future governors and future Legislatures and future generations,” Daugaard said. “Let’s fix this problem for good, this year,” writes Bob Mercer of the Capital Journal.

The other two components of the transportation funding package announced in his speech on Jan. 13 would:

  • "Raise the excise tax on motor vehicle purchases to 4 percent from the current 3 percent.
  • "Raise vehicle registration fees by 10 percent and raise the registration fees for non-commercial trucks to 70 percent of commercial rates this year and 80 percent next year."

Writing for the Rapid City Journal two days later, Mercer describes state Senate Bill 1 [PDF], a competing measure "proposed by the Legislature’s interim committee on highway needs and financing."

The 22-cent gas tax, which has not been raised since 1999, would remain unchanged this year; increased .55 cents on July 1, 2016, followed by nine additional increases "through 2025, when it would reach 28.16 cents per gallon," writes Mercer. No additional increases would occur.

By contrast, the tax would be 44 cents in 2025 under Daugaard's plan; 15.84-cents more than under SB 1. And it would continue increasing.

The senate bill brings in additional revenue by taxing ethanol fuel blends which Daugaard avoids.

House Transportation Committee chairman Mike Verchio (R-Hill City) "served on the interim committee and said he voted for the final proposal so the Legislature could discuss it," writes Mercer. He said he supports Daugaard's proposal, noting that would it was "the first time he had seen automatic increases" to the gas tax. 

“I think it’s long overdue. We have to compensate sometime for inflation,” Verchio said Wednesday. “I think this is really the answer.”

The perpetual gas tax increase, which has yet to be written into a bill, may sound intimidating to gas tax opponents, but it could be changed by a future legislature if adopted. In the Mount Rushmore State, Republicans hold a supermajority in both the Senate and the House of Representatives.

Hat tip to AASHTO Journal.

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Published on Tuesday, January 13, 2015 in Capital Journal
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