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Texas Legislators Eye Motor Vehicle Sales Tax For Road Money Grab

Once again, rather than increasing the state's 20-cent gas tax (29 percent below the national average of 28-cents), policy makers seek to divert revenue to the state's ailing highway fund at the expense of the state's general fund.
March 2, 2015, 9am PST | Irvin Dawid
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"The Senate Transportation Committee on Wednesday (Feb. 25) voted 8-1 in favor of two related measures that would infuse the highway fund with part of the state’s car sales tax revenue," writes Tom Benning of The Dallas Morning News. The two measures would raise more than $2 billion.

Under [Senate Transportation Committee Chairman Robert Nichols'] plan, the vehicle sales tax revenue that goes to the state’s general fund would be capped, starting in 2018, at $2.5 billion a year. The next $2.5 billion a year above that would go to the transportation department. [After $5 billion if reached, the revenue is split between the highway and general funds.]

The Texas Department of Transportation (TxDOT) suffers from a $5 billion annual budget shortfall, which led the legislature to place Proposition 1 on the November 4, 2014 ballot, the state's first transportation diversion measure (at least noted here). It diverted a portion of energy taxes from the Rainy Day Fund to the highway fund. Energy taxes have decreased with the greatly reduced market price of oil.

As Daniel C. Vock, transportation reporter for Governing, wrote after the proposition's overwhelming passage, "supporters hope that kind of lopsided [80 percent] victory will persuade Greg Abbott, Texas’ new governor-elect, and the state legislature to find even more money for transportation in the legislative session early next year." The key word there is "find," as opposed to raise.

Because the motor vehicle sales tax diversion would amend the state constitution, it would have to be approved by the voters. Concerns have already being expressed in the legislature.

Sen. Rodney Ellis, D-Houston, wondered how such a large investment – combined with top lawmakers’ proposed tax relief – would leave room to improve education. A couple senators questioned if the legislation would do enough to wean the state from toll roads....Past efforts to move the car sales tax revenue to transportation drew opposition from budget writers who worried about blowing a hole in the general fund going forward. 

At least one media outlet is calling for the state to actually do the unthinkable, apparently, and that is to raise the 20-cent state gas tax, last increased in 1991. "Actually, it hasn’t stayed the same," according to The San Antonio Express News editorial. "Adjusted for inflation, that 20 cents from 1991 is probably more like 10 or 12 cents today,"

This correspondent was most surprised to read in the editorial that a full 25 percent of the tax, i.e., a nickel, is used to fund education. Texas Future confirms that the split is written in the state constitution.

"The debate will now head to the full Senate, where Lt. Gov. Dan Patrick said he hoped to bring the measures up on the floor next week," adds Benning.

Correspondent's note: As Texas Future notes, "The term diversions is commonly used in highway finance to refer to appropriations from the Highway Fund for non-construction purposes," e.g., used for law enforcement on state highways, which Texas House Speaker Joe Straus is hopes to end, according to the Houston Chronicle.  Planetizen applies a broader meaning to the term.

Hat Tip to AASHTO Daily Transportation Update.

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Published on Wednesday, February 25, 2015 in The Dallas Morning News
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