Bluegrass Beacon: Proponents of raising state’s gas tax are running on empty

By JIM WATERS
Bluegrass Institute for Public Policy Solutions

Thursday, March 11, 2021 — It appears that common-sense conservatism will prevail over crony capitalists and their seeming obsession with raising the commonwealth’s gas tax despite the lingering economic uncertainty created by the fallout from COVID-19.

Hardworking Kentucky taxpayers, many of whom are small-business owners greatly affected by such tax increases, would be the winners if two recent developments play out.

First, while General Assembly leaders are signaling the possibility of increasing some licensing costs – including fees to account for electric and hybrid vehicles’ use of Kentucky’s roads – there’s little appetite for raising taxes during a pandemic.

In December, Senate Floor Leader Damon Thayer, R-Georgetown, told the “Kentucky Politics Weekly” podcast he didn’t think “raising the gas tax during the coronavirus is a good idea,” a position he reiterated recently on KET’s “Kentucky Tonight.”

Second, budget discussions in Frankfort indicate that more of the state’s current gas-tax dollars will stay in the Road Fund rather than being swept and used for other agencies.

After Frankfort plucked $113 million from the Road Fund last year, it was music to this columnist’s ears to hear Sen. Chris McDaniel, R-Taylor Mill, indicate during a budget conference committee hearing that the legislature intends to limit such diversions from the Road Fund.

Many of those diverted dollars are currently redirected to the Kentucky State Police.

McDaniel noted that while the state police will no longer receive those diverted funds, the legislature will ensure the agency’s funding won’t be cut; it just will no longer come from the wrong pot of money.

When this year’s final spending plan is completed and signed by Democratic Gov. Andy Beshear – or vetoed and overridden – tens of millions of additional dollars will be available to build and repair Kentucky roads, all without a tax increase.

Some of the additional funding is the result of around $120 million in a combination of higher revenue estimates and savings made possible by one-time CARES Act funding.

While coronavirus funding has provided some short-term budget relief, the decision announced by McDaniel to not remove $100 million from the Road Fund during each biennial budget cycle is much more beneficial to Kentucky’s long-term economic health by ensuring adequate resources are available for infrastructure needs into the future and protecting taxpayers from unjustifiable tax increases.

The fact that the Road Fund will now have more dollars available – and no convincing evidence those monies won’t be sufficient to meet the commonwealth’s infrastructure needs – leaves the Kentucky Transportation Cabinet, their political allies and crony capitalists still clamoring for a tax increase coasting on empty with little left in their tanks.

The Kentucky Chamber of Commerce, cheerleader in chief for raising taxes at the pump, recently sent a letter to all 138 state lawmakers claiming the 2021 General Assembly will be considered a failure if they don’t raise taxes to the point that their fellow Kentuckians would be forced to pay 53 cents in combined state and federal taxes on every gallon purchased at the pump.

Failing to raise taxes means “the legislature will have neglected to truly help get our economy back on track and ensure employers can recover from the pandemic,” Chamber CEO Ashli Watts wrote.

So, let me get this straight.

The organization claiming to represent Kentucky’s business community insists the only way to revive our economy and boost employers is by taking more out of their pockets during economically uncertain times?

Such an out-of-touch approach may be hailed by big-business interests like a handful of road contractors who often face little competition in the bidding process for highway projects and thus stand to benefit from even more gas-tax dollars.

But most hardworking Kentuckians – including small-business owners who would have to pass increased transportation costs on to their customers – likely consider such an assertion to be clear evidence that the tax-hiking zealots are running on fumes.

Jim Waters is president and CEO of the Bluegrass Institute for Public Policy Solutions, Kentucky’s free-market think tank. Read previous columns at www.bipps.org. He can be reached at jwaters@freedomkentucky.com and @bipps on Twitter.

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