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Pennsylvania’s difficult shift for funding roads

By Anthony Hennen | The Center Square

(The Center Square) – Pennsylvania has the highest state gas tax in America, but gas taxes can’t cover its infrastructure needs in the coming years, which will require some package of policy changes.

A new research brief from the state’s Independent Fiscal Office noted that the average state gas tax burden jumped from $190 in 2013 to $302 in 2018, a 59% increase. The IFO projects the tax burden will fall to $285 in fiscal year 2021. That significant increase was a result of Act 89 of 2013, which changed the tax rate.

Though tax collections have gone up, taxable gallons of gas have been declining over the last decade as vehicles became more fuel-efficient. As electric cars grow in popularity, the state won’t be able to rely on the gas tax to fund highway maintenance, capital projects, and bridge construction. Currently the state gas tax comprises 55% of the Motor License Fund that is used for those purposes.

The over-reliance on a declining tax has caused political fights for how to replace the revenue.

The most controversial alternative has been a bridge tolling plan suggested by the Pennsylvania Department of Transportation, as The Center Square previously reported. Republicans rallied last week to oppose tolling nine bridges across the state, offering to issue a $2 billion bond instead. PennDOT has also suggested a mileage fee program for electric vehicles, and a package or goods-delivery fee to make up the lost revenue.

Pennsylvania’s gas tax of 57.6 cents per gallon is notably higher than neighboring states; the next highest states are Ohio (38.5 cpg), Maryland (36.1), and Delaware (23). 

With so much reliance on the gas tax, which operates in the background, any effort to add tolls or other fees can be politically unpopular, especially with gas prices averaging $5 per gallon. Inflation that drives up the price of materials for road work also squeezes the state.

“As a primary source for state transportation funding, gasoline tax revenues that cannot keep pace with rising project costs could cause funding challenges for DOT’s highway and bridge infrastructure program and limit access to federal reimbursement for project costs,” the IFO report noted.

Though the office expects inflation to return to normal rates by 2024, long-term solutions have not yet materialized from the General Assembly or governor’s office. Democratic governor nominee Josh Shapiro has proposed a “gas tax refund,” but it’s been criticized for favoring wealthy drivers without coming up with an alternative funding plan.

Other states, such as California, have taken a different approach: lawmakers there want to offer tax credits to households with fewer cars and push them to use public transportation, as The Center Square reported.

Pennsylvania is not facing a shortfall for funding its transportation infrastructure. The commonwealth, also, has not yet established what a future less-reliant on the gas tax will look like.

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  • Some states are starting to assess an “EV tax” on annual registrations for electric vehicles. Some are requiring annual mileage data for these vehicles so a mileage-based assessment can be issued. While there are arguments to delay these kinds of revenue captures to help encourage the transition to EVs from internal combustion vehicles, I expect we’ll see some form of this in Pennsylvania sooner or later.

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