Leader Blues

Friday, January 08, 2010

EDITORIAL >> Take these taxes and...

What typically happens to reports of government-sponsored citizen study commissions is that their findings get headlines for a few days and then are bound and stored in the state archives and forgotten. Make room on the shelf for the report of the Arkansas Blue Ribbon Committee on Highway Finance.

The committee will not formally report to the governor and the legislature until its final meeting next week, but its major recommendations seemed apparent this week. It will suggest imposing a fresh excise tax on the wholesale price of motor fuels and indexing the current motor-fuel taxes every year to inflation in highway construction. The Arkansas Democrat-Gazette reported that those were the funding measures most favored by the citizen committee members. Sen. John Paul Capps (D-Searcy) is the committee chairman, and it also includes former Rep. Mike Wilson of Jacksonville.

The state Highway Commission says it needs a huge increase in highway funds to maintain the current system and meet the changing traffic demands, including completion of the North Belt freeway, which would cost $200 million, as was reported here last weekend. (Letís see, when did the Highway Commission NOT need a huge increase in funds? Our memory only goes back 70 years.)

Letís admit that there is a problem. As vehicles become more and more fuel efficient ó President Obamaís new fleet-efficiency standards will raise the mileage of vehicles even more dramatically over the next dozen years ó the taxes that the state collects for each mile traveled on the roads keep declining. Traffic is increasing and the cost of road-building and maintenance is increasing but road-building money is dwindling. Itís a nightmare for highway agencies but a beautiful scenario for motorists who pay fewer and fewer taxes per mile ó at least until the roads and bridges crumble.

But the Arkansas legislature is not going to pass new fuel taxes ó not at the truncated fiscal session next month, and not at the big regular session in 2011. Not, at least, unless the economy comes roaring back and oil prices collapse, and probably not even under those conditions.

It takes three-fourths of the members of both houses of the legislature to raise motor-fuel taxes under the perverse constitutional amendment ratified during the Great Depression. No Republican is allowed now to vote for a tax of any kind because he or she will be drummed out of the party. Since the party now owns a fourth or more of the seats in both houses and probably will increase their numbers this year, that factor alone disposes of the idea of raising highway taxes in the foreseeable future. A sizable quotient of Democrats will vote no, too.

So the nimble citizens on the Blue Ribbon Committee have produced a couple of wrinkles that might get the taxes enacted by a simple majority of both houses. An excise tax on the wholesale rather than the retail price of gasoline would feel the same to consumers but it might be considered an entirely new tax rather than a tax increase and thus not subject to the three-fourths requirement.

The same argument might hold with indexing gasoline taxes to rising (or falling) construction costs. The argument would be that it was not an increase in the tax rate but merely a new formula for calculating the tax rate. The tax rate, you see, could go down as well as up if the country hit a deflationary period.

The parliamentarians of the House and Senate will accept those legal arguments and the courts might, too, after the inevitable lawsuits. But motorists will not. No matter which way the tax rate is calculated, the numbers in the little windows at the pump are the same.

We happen to think the new taxes would be just. We demand smooth, safe and convenient highways and they must be paid for somehow. User taxes are the fairest way. But most motorists and now most legislators will take lots of convincing. Governor Beebe has already indicated that he probably wonít take on the task of selling it.

We thought they had found a better and more politically pleasing way to do it in 2008 when Sheffield Nelson, the old gas man, proposed an initiated act raising the severance tax on natural gas from infinitesimal to 7 percent of the wellhead price. It would raise revenue for highway maintenance and building.

But when Governor Beebe took the idea to the legislature, he had to satisfy the big gas producers to get the three-fourths vote in both houses. Many lawmakers were not going to vote against the interests of the gas companies. So the act created such huge exemptions for the producers and royalty owners that the 5 percent tax raises very little revenue. The money will pick up a little in a couple of years, but it will be a pittance.

That is the politics of highway funding. It will get no better and probably considerably more perilous in the next two years.

Take this study off the shelf in about five years. People will be mad enough by then to want some action.

Until then, donít expect any major highway improvements, certainly not the extension of the North Belt Loop this decade ó although we do remember legislators from north Pulaski County promising us more than two decades ago that a gasoline tax increase would pay for the North Belt Loop. It didnít even pay for half of it. The cost has more than tripled since then.