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Gov. Chet Culver said Friday he will veto any attempt to increase the state's fuel tax.

Culver, who has been an outspoken critic of the idea, previously stopped short of saying he would veto it. That changed today.

“I have been clear and consistent in my opposition to an increase in the gas tax, but let me leave no doubt: I will veto any increase in the gas tax,” Culver said. “We have many important issues to address this year, including creating new jobs, but raising taxes on hard-working Iowans is not one of them.”

The governor said he wanted to make his position clear so lawmakers would not spend any more time this session with the issue. Both the House and Senate Transportation committees were set to discuss an increase next week.

Senate Transportation Committee Chairman Tom Rielly, D-Oskaloosa, sponsored the bill to increase the gas tax.  He told The Des Moines Register that without the governor’s support, the bill is dead.

A broad coalition of supporters had lined up behind the gas tax, including Democratic leaders in the Legislature, Republican state Agriculture Secretary Bill Northey, the Iowa Farm Bureau and local chambers of commerce. Culver, along with Republican leadership in the state Senate, stood opposed to the measure, saying raising any tax during an economic recession is poor public policy.

Supporters of the fuel-tax increase contend that Iowa needs more money to maintain the road system and make improvements to support economic development. A 10-cent increase in fuel taxes would raise an additional $210 million annually for city, county and state road projects. Iowa’s fuel tax currently ranks 32nd nationally and hasn’t been raised since 1989.

Culver has insisted that the recently passed federal stimulus package, in conjunction with his plan to borrow nearly $750 million, is a better way to pay for road and bridge repair than raising the fuel tax.

“President Obama’s federal recovery plan provides Iowa with over $350 million for transportation,” Culver said. “And my own jobs and infrastructure proposal will include another $250 million for transportation, especially for road safety and deficient bridges. These two better options mean more than $600 million to create jobs and improve our infrastructure, without raising taxes on Iowans.”

However, some economists fear that combination of funds is a short-term fix and will leave the state looking for infrastructure funding again when it runs out.

“If you want to fix the roads, the most efficient way to fix the roads is charge a user fee and in the current environment, the most efficient user fee is some type of fuel tax,” Arne Hallam, an economist at Iowa State University, recently told a joint session of House and Senate Transportation committees.

Rielly implied to The Register that while a gas-tax increase is dead this session there is little doubt it will need to be raised in the years to come, an idea Culver said he is open to.

The bill would raise Iowa’s 21-cent fuel tax by 4 cents now and another 4 cents in 2010. It would eventually raise nearly $170 million annually for road and bridge construction projects. A similar bill has also been introduced in the Iowa House.

The state hasn’t raised its gas tax since 1989. Iowa’s gas tax ranks 32nd nationally.

Democratic legislative leaders have been joined by a broad coalition of interest groups, including the Iowa Farm Bureau and local chambers of commerce, in advocating for a gas tax increase. Democratic Gov. Chet Culver and Republican legislative leaders have said they don’t want to raise any taxes during a recession, with Culver favoring his $700 million bonding plan to fix Iowa’s crumbling infrastructure.

Culver has not yet gone so far as to say he would veto the measure if it is passed.

State Auditor David Vaudt

“The gas tax is historically where we’ve gotten the funds for our roads and bridges,” said Vaudt, a possible 2010 GOP gubernatorial candidate. “It can provide a more long-term revenue stream than other options.”

Both chambers of the Legislature are currently weighing bills that would raise the fuel tax 8 cents over two years. In addition to legislative Democrats, conservative groups like the Iowa Farm Bureau and local chambers of commerce have voiced support for the increase, along with Republican state Agriculture Secretary Bill Northey. Iowa hasn’t increased its fuel tax since 1989.

The millions of dollars the state will receive from the recently passed federal stimulus bill will help in the short run, Vaudt said, but once that money is gone, Iowa will still be left with the question of how to maintain its roads.

“One thing we haven’t seen enough details on yet is how much the federal stimulus is going to bring to Iowa that might be used for infrastructure related projects and how that is going to impact the needs analysis,” Vaudt said. “But that is just going to be a short-term fix. That money will be gone in a few years, and we will still need a revenue stream to maintain our infrastructure.”

Warren Jenkins, Vaudt’s chief deputy auditor, said consumers are also going to be more receptive to a fuel tax increase if it helps them avoid other costs.

“I think people are looking at whether it’s going to help avoid a repair bill for their cars because (of) the poor condition of the roads and bridges,” he said. “Whether it’s a blown tire or alignments or general wear and tear because the roads are so bad, there is a trade-off there that I think people get.”

Vaudt said another factor that could soothe taxpayers’ fears is that the funds raised by increasing the gas tax are constitutionally protected from being shifted to another project.

“The money will be spent on what it was collected for, as opposed to being shifted over to pay for other things,” he said. “I think that’s part of what is generating more support for gasoline tax than what we’ve seen in other areas.”

Opposing a gas tax increase are Gov. Chet Culver, a Democrat, and Republican legislative leaders. Culver has said he prefers his $700 million bonding plan. Vaudt said bonding would have the same short-term effect as the federal stimulus, except it will need to be paid off over 20 years.

“I think if you take a look at it, if you use bonds, it’s going to be a fix over a short-term period of time versus a gas tax that will provide a steady revenue stream,” Vaudt said. “The other part with bonding is you’re going to pay interest costs, too.”

Another factor to consider, Vaudt said, is how much infrastructure work Iowa can undertake in a short time period. The federal stimulus money will fund “shovel-ready” projects that can start soon.

“There would be a lot of money put into construction,” he said. “Do Iowa companies have the capacity to do all that work or will we be bringing in out-of-state workers to do some of it, especially if we pass bonds on top of that? It’s something we should be looking at, as I don’t think we have all the details on the table yet.”

Iowa’s infrastructure needs are the victim of short-term thinking, Vaudt said, and it is time that changed.

“If we did longer-term planning, we would have the ability to at least take a look at what we’re doing, what the requirements are upcoming and how we’re going to meet those needs,” he said, adding: “There is no magical right or wrong answer. I think if you talked to the average taxpayer, they would say they don’t want taxes increased, period. But at the same time Iowa has to decide what revenue stream we need in order to provide these services.”

Iowa lawmakers are currently considering an 8-cent increase in the state's gas tax. Iowa hasn't increased its 21-cent gas tax since 1989.

Arne Hallam and David Swenson of Iowa State University’s economics department testified before a joint meeting of House and Senate transportation committees that the heaviest users of state roadways should bear the largest burden for maintaining them, including out-of-state motorists and truck drivers.

“If you want to fix the roads, the most efficient way to fix the roads is charge a user fee and in the current environment, the most efficient user fee is some type of fuel tax,” Hallam said.

The two agreed that the overall impact on the average Iowan would be minor. A 10-cent increase in the gas tax would cost anywhere from $33 to $100 a year depending on an automobile’s fuel efficiency. Iowans can offset how much they have to pay because they choose their vehicles, Hallam said.

“You can trade in your Dodge Ram for a Toyota Prius,” he said.

Lawmakers are currently considering bills in both chambers that would increase the state’s fuel tax 4 cents this year and 4 cents in 2010, a move expected to bring in nearly $170 million a year for critical road and bridge repairs.

Gov. Chet Culver has repeatedly said he does not support any tax increases during an economic recession. Monday he said the $358 million in infrastructure money the state will receive from the federal stimulus bill makes the gas tax an even worse idea.

Hallam said Iowa should use the federal money for projects where a user fee, like the gas tax, can’t be imposed. Hallam also called the gas tax a fairer solution than borrowing to pay for roads, an idea pushed by Culver.

“It’s obvious that the state of Iowa has underinvested in recent years,” Swenson said. “We’ve used up much of our infrastructure, we’ve not been paying full cost, we’re probably realizing the consequences of that with slower travel times and vehicle damage. This is a cost that has to be made back up and [increasing the gas tax] is one good way to do it.”

State Sen. Tom Rielly told AP’s Mike Glover that, despite Gov. Chet Culver’s objections, he plans to continue the process of passing a bill to raise the gas tax this year.  “We’re going to let the process work its way through,” said Rielly, chair of the Transportation Committee.

The proposal in question would raise the gas tax by a total of 8 cents per gallon — 4 cents this year and 4 cents next year — and would pay specifically for transportation infrastructure maintenance.

So in the spirit of overzealousness that tends to enthrall political junkies everywhere when there isn’t a real campaign to watch, I decided that I should probably read as much into the whole thing as I could.

The basics

Vander Plaats opposes a gas tax increase like Gov. Chet Culver.

Secretary of Agriculture Bill Northey, who is seen as another serious Republican candidate for governor, told the Iowa Independent that he was open to the idea, which has been supported by traditionally conservative groups like the Farm Bureau.

“I think generally with [agriculture] folks, a pay-as-you-go gas tax makes the most sense to address those road concerns,” Northey said. “I think everyone has been looking around for other options and there is no magic pot of money sitting around to do those things.”

Vander Plaats said he was surprised that some conservative groups were supportive of a gas tax increase, and he described it as a “real problem” within the Republican party:

“What I mean is these groups and individuals are so caught up in the ‘system think’ that they need to get outside the box and think of a different way,” he said, later adding: “Iowans have had it with the increased taxes. They’ve had it with the increase in government. They’ve had it with having their lives controlled. They want someone who will lead the state of Iowa, not just grow the size of government.”

How will the issue play itself out?

Bob Vander Plaats

While the merits of a gas tax increase are debatable on policy grounds, the political realities of advocating any kind of tax increase at the beginning of a Republican primary are pretty easy to grasp.  Republican primaries tend to penalize candidates who want to raise taxes, and they tend to reward candidates who want to lower taxes.

Let’s trudge a little deeper into the weeds.

If Northey decides to run for governor in 2010, he could probably survive his openness to a gas tax increase if it stays out of the Iowa Code and remains an abstract idea.  Once he gets onto the campaign trail, he could back away from supporting a gas tax increase in the near future, and Vander Plaats would not be able to use the issue to any significant advantage.

Bill Northey

The more interesting scenario would happen if a gas tax increase passes this year.  Northey would have trouble coming out against this particular increase after his expression of openness to it just last week, and he would be caught between a rock and the Farm Bureau if he tried.

With a gas tax increase on the books, Northey could lose support among anti-tax fiscal conservatives. Northey will probably need to win over the more fiscally conservative wing of his party if he hopes to defeat Vander Plaats, whose strongest support will likely come from the socially conservative wing of the GOP.

Now, put yourself in Culver’s shoes: Northey is a popular Secretary of Agriculture, and he won his position by an impressive margin in 2006, a year that saw significant gains for Democratic candidates everywhere else on the ballot.  Vander Plaats is a serious candidate, but he has no government experience and a history of losing campaigns.  Whom would you rather face in the 2010 general election?

Culver says he opposes an increase in the gas tax, but he has not explicitly threatened a veto yet.  Some lawmakers on both sides of the aisle have signaled support for the idea, and bills have been introduced in both chambers of the state legislature.  If a bill ends up on the governor’s desk for a signature, the chance to hang an albatross around Northey’s neck — one that could knock him out of the GOP primary and stall his burgeoning political career — could prove tempting.

I’m not saying it’ll happen, but who knows?

Sioux City businessman and GOP gubernatorial hopeful Bob Vander Plaats.

The Sioux City Republican told the Iowa Independent that it was overspending during Gov. Chet Culver’s first two years in office that led the state into the budget crisis, and that budget reductions will right the ship.

“Everybody is running around like the sky is falling, which points to a true lack of leadership and focus on our priorities,” Vander Plaats said.

Vander Plaats, who previously ran for governor in 2002 and 2006, said the state budget presented in January by Culver is $900 million larger than it was in 2007. So instead of increasing taxes or borrowing to fix a projected budget shortfall, the state could feasibly cut everything that is not a priority.

“Schools are a priority. Roads are a priority. Courts are a priority. Public safety is a priority. Those who need special assistance would be a priority,” he said. “What I would like to see Gov. Culver do is say that these are our priorities. This is how we are going to fund them and this is how we’re going to live within our means. There is no reason the sky should be falling.”

Culver’s $700 million bonding plan, which the governor said is the best way to repair infrastructure in desperate need of attention due to neglect and last summer’s flooding, is just an invitation for more gambling to be introduced to the state, Vander Plaats said. The governor has said he will secure the bonds with $56 million a year in gambling revenue.

“So when you have a $700 million bond issue that is being paid for on the back of the gambling industry, Iowans read into it that you’re expanding gambling because the money the industry is producing is already committed to other things,” he said. “So either tell me what you’re going to cut or tell me what casino you’re going to add in Iowa.”

One area where Vander Plaats and his Democratic rival do agree is on the gas tax. Legislators have proposed increasing the tax Iowans pay per gallon of gasoline 8 cents over the next two years. Culver has said it isn’t prudent to raise any taxes during an economic downturn, a sentiment Vander Plaats shares.

It was on the subject of the gas tax increase where Vander Plaats fired what some could consider the first shot of the campaign for his party’s nomination for governor. Several conservative groups, like the Iowa Farm Bureau and local chambers of commerce, have supported the idea of increasing the gas tax to fund infrastructure repair. Joining them is state Agriculture Secretary Bill Northey, who said last month he is considering running for governor himself.

Northey told the Iowa Independent earlier this month that the condition of Iowa’s roads and the impact that could have on the agriculture economy have people who would normally oppose any tax increase, himself included, willing to give the gas tax a chance.

“I think generally with [agriculture] folks, a pay-as-you-go gas tax makes the most sense to address those road concerns,” Northey said. “I think everyone has been looking around for other options and there is no magic pot of money sitting around to do those things.”

Vander Plaats said he is not surprised some Republicans and conservative groups support the gas tax, “but it should be an indicator of a real problem.

“What I mean is these groups and individuals are so caught up in the ‘system think’ that they need to get outside the box and think of a different way,” he said, later adding: “Iowans have had it with the increased taxes. They’ve had it with the increase in government. They’ve had it with having their lives controlled. They want someone who will lead the state of Iowa, not just grow the size of government.”

Vander Plaats hopes that the network of supporters he has built in his two previous gubernatorial campaigns, along with his work as state chair for Arkansas Gov. Mike Huckabee’s successful Iowa caucus campaign, will finally push him past the primaries and into the general election.

“What I’m trying to point out is the organization I built in 2002 and have continued to build ever since is as solid and savvy an organization as you’re going to find anywhere for a Republican in Iowa, and that organization is ready to perform in 2010,” he said.

Your recent article, Gas tax showdown on the horizon (February 9),  did a good job of laying out the debate taking place in the capitol over a proposal to hike the state gas tax.

Iowa taxpayers, who already see over 9.3 percent of their earnings consumed by state and local taxes alone, should not be on the hook for lawmakers’ profligate spending. As it stands, Iowa residents already work 190 days annually, well over half the year, just paying for the cost of government.

The cadre of taxes and fees levied on fuel include sales, gross receipts, oil inspection fees, and other environmental fees. When it is all said and done, more than 51.2 percent of the cost of fuel is consumed by federal, state, and local taxes.

This fact, along with the other aforementioned points, should make any motor fuels tax hike proposal a nonstarter for all lawmakers. Rather than raise the gas tax, Iowa legislators should pass a law to place labels on every gas pump indicating the level of gas taxes levied by the federal and state governments. This would result in greater transparency and make consumers more aware of the hidden taxes associated with each purchase.

Patrick M. Gleason
Americans for Tax Reform
Washington, D.C.

Senate Study Bill 1182 and House Study Bill 164 both call for money raised to be put into the TIME-21 fund, a pool of money created to fund critical infrastructure needs around the state. Senate Transportation Committee Chairman Tom Rielly, D-Oskaloosa, said any money raised up to $200 million would go to the fund, with the remainder going into the state’s road and bridge fund.

Rielly said studies have shown a 10-cent increase in the gas tax would bring around $210 million to state infrastructure funds. By that math, the combined 8-cent increase would eventually raise nearly $170 million annually. Iowa motorists now pay estimated state taxes of 21 cents per gallon for regular gasoline; 19 cents per gallon for ethanol-blended gasoline; 17 cents per gallon for E-85 fuel; and 22.5 cents per gallon for diesel fuel.

The state hasn’t raised the tax since 1989.

Democratic legislative leaders have been joined by a broad coalition of interest groups, including the Iowa Farm Bureau and local chambers of commerce, in advocating for a gas tax increase. Democratic Gov. Chet Culver and Republican legislative leaders have said they don’t want to raise any taxes during a recession, with Culver favoring his $700 million bonding plan to fix Iowa’s crumbling infrastructure.

Iowans for Tax Relief, a conservative group with a lot of influence in the Republican Party of Iowa, originally declared it would not take a position on the gas tax. The group’s President Ed Failor Jr. told The Des Moines Register the gas tax increase was not a bad concept since the government’s primary role is to take care of roads and the money is Constitutionally protected from being spent on anything except road and bridge repair.

However, lobbyist declarations on the House bill show Iowans for Tax Relief has changed its mind and is now against an increase to the gas tax.