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Iowa ranks low for keeping up with gas tax

Tax on fuel in Iowa is 21 cents per gallon of gas, 19 cents per gallon of ethanol.

A new report shows Iowa is one of 10 states where the gas tax, when considering inflation, is at a historic low.

The report was critical of falling behind on the gas tax, saying the tax supports roads and transportation infrastructure, and many states are falling behind.

“This isn’t a mysterious problem,” said Carl Davis, a senior analyst who wrote the report from the Washington-based Institute on Taxation and Economic Policy. “A lot of states, including Iowa, haven’t kept up with gas tax, and they’re paying for it with lower quality roads.”

The report comes after an Iowa legislative session in which lawmakers considered but ultimately didn’t adopt a 10-cent gas tax increase.

Meanwhile, transportation officials point to a $215 million backlog of critical infrastructure needs, such as the second-highest number of structurally deficient bridges in the nation.

Iowa has a 21-cent-per-gallon tax on gasoline and a 19-cent tax on ethanol, which is within a cent of the rate set in 1989, according to the Iowa Department of Revenue. That’s the fourth longest without an increase behind Alaska, Virginia and Oklahoma, Davis said.

State Rep. Brian Moore, R-Bellevue, serves as vice chairman of the transportation committee in the Legislature. He supports a gas tax increase and said it’s “in the works” for next year.

“We need to impress upon the leadership that need for infrastructure funding,” Moore said. “We need to get something done.”

Iowa Gov. Terry Branstad has stayed neutral on the gas tax, while the state Republican Party calls it a “creature” that won’t go away.

Others say the report of Iowa’s low tax level is something to celebrate, not evidence for an increase.

“We should be proud of having a low tax rate,” said Lindsay McQuarry, policy director of Iowans for Tax Relief. “It’s not something we need to fix.”

McQuarry said the state should draw from its budget surplus to address the transportation needs. According to a financial analysis of the state’s general fund, Iowa is projected to have a $1.08 billion surplus in fiscal 2015.

She also said Iowa’s gas tax formula doesn’t address some of the most pressing transportation needs, such as roads and bridges in rural counties.

Alabama, Alaska, Delaware, Idaho, Nebraska, New Jersey, South Carolina, Utah and Virginia are the other states with historic lows in gas taxes. Davis said several states that aren’t on the list are projected to hit all-time lows, and others are only minimally above the historic benchmark.

The report considers the buying power of the gas tax over time to reach its conclusions.

For example, Iowa’s 2-cent gas tax in 1923 would have the equivalence of 27 cents per gallon today. Iowa’s gas tax value peaked in 1957 when the gas tax was 7 cents, which in today’s dollars would be 59.1 cents per gallon, according to the report.

Peter Fisher, research director with the Iowa Policy Project, said the gas tax is a fair system for financing the roads. The more you drive the more you pay, and typically a bigger vehicle puts more wear on the road but requires more fuel.

However, he said, raising the tax also would burden lower-income travelers disproportionately because the tax would make a bigger dent in their paycheck.

Still, it may be time to raise the tax, he said.

“I think the momentum is going to continue to increase,” Fisher said. “But, it’s not a winning political issue. It has to be a bipartisan effort to get a bill through.”

Davis called the gas tax a “thorny” issue because motorists aren’t keen to pay more at the pump, but the trade-off is deteriorating and potentially unsafe travel conditions. The increased price of crude oil, not a gas tax, is to blame for high gas prices, Davis said. But motorists don’t consider the gas tax history, they just don’t want it to increase, he said.

He said Iowa is “procrastinating” more than typical.

“At some point, eventually, you have to have it,” Davis said. “You can’t rely on a 6 percent gas tax continually.”

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