Road Group Considers Gas Tax, Revenue-Neutral Options

Raise the gas tax while gas prices are low to produce an immediate infusion of funds for highways? Or choose more modest “revenue neutral” proposals that would have a better chance of passage through the Legislature?

Those were two approaches considered today by the Governor’s Working Group on HIghway Funding.

Appointed by Gov. Asa Hutchinson, the working group has been meeting to consider how to close funding shortfalls for Arkansas’ highways caused by increasing construction prices, decreasing gas tax revenues from increasingly fuel-efficient vehicles, and uncertainty about money coming from Washington. It currently is focusing most of its attention on closing the gap in the short term.

Afterwards, Chairman Duncan Baird said the task force, which is scheduled to meet until Dec. 15, could try to present Hutchinson a “menu of options” rather than a specific recommendation.

Several members of the working group expressed support for raising the gas tax, which has remained the same at the state level since 2001 and at the federal level since 1993, and was not indexed to inflation. Craig Douglass, executive director of the Arkansas Good Roads Foundation, advocated a 10-cent-per-gallon increase in both the gasoline and diesel fuel taxes. He said a number of states have done so, and that gas prices are low and should go lower with the end of the summer driving season.

Meanwhile, Frank Scott, a member of the Arkansas Highway Commission, recommended phasing in a 15-cent-per-gallon motor fuels tax and indexing it to inflation. He also suggested motorists be charged a “reportable miles traveled” tax based on a self-reported amount of distance traveled. That would help fill gaps in receipts caused by drivers of alternative fuels vehicles, who pay less or no motor fuels taxes. State Sen. Bill Sample, R-Hot Springs, expressed support for indexing the tax to inflation with a floor or cap “because if we don’t, we’re going to be up here every year or two years with a hand out.”

Randy Zook, president and chief executive officer of the Arkansas State Chamber of Commerce, and Shannon Newton, president of the Arkansas Trucking Association, both expressed strong support for raising the gas tax. Zook said the business community needs a dependable transportation system. Newton said the fuel tax is the most efficient way of raising money, and the state’s truckers are ready to raise their own taxes for better roads.

But Rep. Andy Davis, R-Little Rock, said legislators will not support any kind of gas tax increase. He said Hutchinson asked the working group to be creative and also politically realistic and that any proposal should be revenue neutral.

“The Legislature, I don’t believe, is going to consider any new revenue until they’re confident that we have turned the couch upside down and (shaken) every penny out of it that we can,” he said.

Davis then proposed a number of options, including a sales tax rebate for construction materials; redirecting some of the state’s surplus funds to highways; and shifting to highways diesel taxes and half-cent sales tax receipts that currently go to general revenues and state government administrative costs. He said the state could actually cut the gasoline and diesel tax and then offset it with an increase in the taxes and fees paid by alternative fuel vehicles. Such a move would replace a declining source of revenue with one that will increase.

After hearing Davis’ presentation, Sample said the working group shouldn’t look for short-term ideas. Douglass and Zook said Arkansas voters have shown they will support investing in roads when given a good reason to do so, as when they passed an interstate bond issue in 2011 and a half-cent sales tax in 2012. Scott said the working group should consider both raising the motor fuels tax and Davis’ ideas.