SADOW: Louisiana Needs An Overhaul Of Road-Funding Taxes

As complaints about Louisiana roads in quality and quantity have increased continually, if anything expect things to get worse on these accounts before they get better unless big changes to how taxes are collected are in the offing.

That implication came through in a recent discussion arranged by the Public Affairs Research Council, involving policy-makers and group representatives. They emphasized a recent Legislative Auditor report that noted the retail fuel excise tax will erode significantly in its ability to provide money for roads in order to tackle a $15 billion in expressed needs.

Two trends drive that: slow but steady improvement in overall gasoline efficiency and slow but steady growth in the proportion of non-fossil fuel engines on the road. Both reduce the amount of gas sold thus tax collected.

Big government advocates blithely advocate for a hike in the gas tax, as Louisiana has one of the lowest in the country, as a solution. But that would require a massive increase impacting one of the weakest states economically because historically not only has it had a low gas tax but also as it devotes fewer dollars relatively from general fund taxes collected.

The idea of an excise tax on fuel purchase devoted to roads makes for a very desirable tax, as it is paid largely in proportion to use and is very cheap to administer. But few states fully fund transportation this way (nor does the federal government in its grants deployed, as it now runs a deficit in that versus federal gas tax revenues), and Louisiana is among a handful of states that don’t even fund half of roads construction that way.

Converting the excise to a sales tax wouldn’t work well since the price might fluctuate wildly, as witnessed over the past two years. Researchers have come to a general conclusion that a vehicle miles travelled tax if precisely applied would do best, with even better efficiency than the excise tax, and it captures alternative-fueled vehicle road use as well.

The problem there is the most precise measurements would require extensive standardization and data-sharing across states, meaning higher administrative and compliance costs, yet some rough approximation regimes for some vehicles, and would induce major privacy concerns. Unless states all move together to address these, Louisiana policy-makers likely will blanch at trying to assume disproportionate costs and tolerate the imperfections inevitable as near-first adopters, not to mention privacy concerns.


Thus, the best solution would create a hybrid of the two that loses some efficiency but ensures all roads users pay a basic minimum while maintaining privacy. This can be done by extending something like the weak attempt last year regarding electric vehicles in imposing an annual fee on them, which problematically not only set the rate too low, but also sets collection in the Department of Revenue that makes it easier to evade.

That needs revision for next year, perhaps keeping the rates only for the lowest weight vehicles such as motorcycles and setting higher costs for those with higher weights as these wear more on roads. The same also could be done for non-alternative fuel vehicles, pegging this at replacement value for current roads expenditures of passenger miles traveled so that all together the different weight classes equaled 1.5 cents per mile travelled overall and keeping a similar 70/30 split between state and parish roads funding.

In isolation, that would provoke a tax increase for fossil fuel-powered vehicles, so to offset that it should be phased in by 0.3 cents at a time over several years, cutting the retail excise tax at the pump the same fifth at a time along the way. Enforcement also would have to be shifted to the Office of Motor Vehicles, which has vehicle registration information used to price correctly and would have to institute annual vehicle registrations (and for new purchases pro-rated) that would include the fee.

With the addition of alternative fuel vehicles priced properly, this should increase available money beyond the forecast baseline (and even more if legislators choose to divert sales taxes from electric charging stations to roads) and allay to some degree concerns about transportation underfunding. Lawmakers would do well to tackle this issue this spring.



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