States Hiking Road Taxes to Make Up for Congressional Inaction

August 19, 2014 | By: TaxCure Staff

state taxes rise to pay for infrastructureWhen it comes to taxes, we often think mainly in terms of federal taxes. However, most of us pay quite a bit when it comes to state taxes as well. And, indeed, many states collect various taxes in order to fund certain state-provided services.

Lately, a lot of attention has fallen on roads. This is because the federal fund used to pay for roads is running dry. Funding our roads long-term has been a sticking point with Congress — and our lawmakers went on vacation before coming to a long-term solution. While something short-term has been passed, the truth is that we’re going to run into this problem again.

This is where some states are stepping in. Recognizing the infrastructure problems plaguing the United States, some states — even those that are generally against taxes — are raising taxes meant to help pay for roads.

Hiking Road Taxes to Pay for Infrastructure

Our transportation systems are aging. In many cases, the United States (still considered the richest country in the world) has roads that don’t look like they belong to the first of first-world countries. In order to remedy that, the Associated Press reports, many states are moving forward to raise revenue aimed at roads.

According to a review done by the AP, about 25 percent of states have increased taxes, fines, or fees in an effort to raise revenue for roads in the last 18 months. Additionally, at least 12 other states are considering their options.

One of the reasons that this is an issue is due to the fact that revenues are declining from fuel taxes. Indeed, with fuel-efficient cars on the rise, and with a move away from gasoline-powered cars, there just isn’t the same income from fuel taxes at the state and federal levels. On top of that, high gas prices in recent years have prompted many consumers to drive less. The use of public transportation is on the rise, and that reduces the need for gasoline as well.
In order to increase revenue, many states propose sales tax increases, or they increase fines for traffic infractions. When it comes to tax increases, states that ask for votes on the issue make it a point to talk up the investment that infrastructure is.

Approaching the problem as an investment can get more taxpayers behind a tax increase. Indeed, when taxpayers know exactly what a tax increase is meant to pay for, and when they see it as something that they can benefit from, they are more likely to agree to it. So, some states are making it a point to show that improved infrastructure can benefit everyone, providing jobs, better roads, and a better future.

These moves by states won’t completely solve the problem — especially at the federal level. In states, Republicans and Democrats are working together. On the federal level, though, Congress is essentially useless due to partisan fighting. And, with the long-term fate of the highway fund not decided, it might be some time before the federal government can actually address the issues related to our failing road infrastructure.