Roads and bridges get big boost in funding – without tax increase
By Doug Loon
President of the Minnesota Chamber of Commerce
Sometimes common ground is hard to recognize in politics. That makes acknowledging it all the more important. One issue on which citizens and elected officials agree: We need safe, reliable roads and bridges throughout the state. Whether you’re moving goods and services to create jobs or simply heading to the lake this summer, there is reason to celebrate.
Minnesotans today are reaping the benefits of bipartisan legislation passed two years ago. July 1 marked the full phase-in of the portions of transportation-related sales taxes dedicated to state roads and bridges. More than $200 million a year will go directly to transportation — without a tax increase.
Transportation funding took center stage at the Capitol this year when Gov. Tim Walz and the House proposed a 70 percent increase in the gas tax — 20 cents per gallon. The tax hike raised red flags for us as the Minnesota business community historically pays between one-half and one-third of the gas tax.
That conversation distracted from the good news: significant investment in roads and bridges the past two years. In 2017, Gov. Mark Dayton and the Legislature, in concert with many other stakeholders, dedicated 100 percent of the sales tax on rental vehicles and just over half of the sales tax on auto parts to transportation. The transfer was phased in, generating about $100 million in each 2017 and 2018. Now complete, the investment doubles to $200 million. That’s equal to a 7-cent gas tax increase.
The state finances the highway system almost entirely by constitutionally dedicated user fees — gas tax, license tabs and motor vehicle sales tax. Electric cars, better mileage and less driving cut fuel consumption, and even the Minnesota Department of Transportation warned earlier this year that gas tax revenues are reaching a plateau. But the need for critical infrastructure is no less important to keep Minnesota competitive.
Employers support smart investments that move our economy forward and recognize the significant value of our transportation infrastructure. The public agrees. In a survey earlier this year, 75 percent of Minnesotans said they support increasing funding for transportation. It’s time to dedicate 100 percent of the auto parts sales tax. This additional, significant investment in roads and bridges is a sliver of the general fund without raising taxes — equaling about one penny out of every tax dollar. And Minnesotans support increased transportation funding by a margin of nearly three to one.
What would this mean for the state’s highway system? Full dedication of these two existing sales taxes would generate an additional $100 million, totaling $300 million per year, or the equivalent of a 10-cent gas tax. Most important, using 100 percent of these sales tax revenues for transportation would allow us to match a growing revenue with the year-over-year growth in construction costs. The sales-tax revenues are projected to grow about 3 percent a year.
Finding common ground for critical infrastructure was possible in 2017, and remains possible in the next legislative session and beyond. Dedicating reliable funds to our roads and bridges is investing in the future of our state.
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