Proposed Fuel Tax Hike Would Make Iowans Wither

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Raising taxes in the name of transportation funding is not a new trend among state legislators. Last year, Virginia Governor Bob McDonnell signed into law the largest tax hike in Virginia history in the name of transportation. Sixteen other states — including Wyoming, California, Maryland, and Michigan – have also passed gas tax hikes in their respective states to fund various transportation projects. In doing so, lawmakers have effectively increased the total tax burden of residents every time they go to the pump. Rather than following this harsh economic model, Iowa legislators should seek adequate funding from their budget instead of sticking taxpayers with the bill.

As the main proponent of the proposed 3-year, 10-cent fuel tax increase, the Iowa Soybean Association says it has been trying to get some kind of fuel tax increase for the past four years. The Iowa Legislature should make the Soybean Association wait even longer: indefinitely is a good start.

According to the Tax Foundation, Iowa already has some of highest tax rates in the nation with a top marginal personal income tax rate of 8.98 percent, a top marginal corporate income tax rate of 12 percent, and a ranking of 40th in Business Tax Climate. Additionally, the Hawkeye State lost $3.52 billion in annual AGI between 1992 and 2010. By raising tax on fuel to 32 cents, Iowa would have the 16th-highest gas tax rate in the U.S., further rendering one of the cornerstones of the “American Heartland” economically uncompetitive in the region and nationally.

While all Iowans would feel the impact of this increase, the greatest impact would most likely fall on those with long, weekly commutes and out-of-state visitors. With an average daily commute of 11.5 miles to work, according to the Iowa Transportation Department, and limited public transportation options, a rise in fuel prices will greatly reduce the amount of goods and services taxpayers can afford each month. While 23 miles to and from work a day might not seem like a lot, the commute can cause quite the sting over 52 weeks in a year.

Out-of-state visitors coming to Iowa for business purposes will also have greater incentive to fly to certain cities or avoid certain routes where gas prices will be the highest. Additionally, companies within the Hawkeye State that employ commercial and private drivers, reimburse travel mileage, and have business operations across or outside the state could be forced to make significant cuts to cover the extra operating costs, most likely by reducing employee hours, total number of employees, or policies involving fuel reimbursement.

While the roads connecting people, businesses, and fields may need improving, the Iowa Soybean Association should be working to ensure these repairs are done without sacrificing any jobs or placing the burden on people unable to vote in the state of Iowa.

By seeking a tax hike to pay for these road projects, the legislature has acknowledged that this issue remains at the bottom of its list of things to do in the state. If state legislators really sought to work with farmers and the ISA to repair the roads, they would’ve done so without raising taxes and finding funds within the annual state budget. Besides, as in the case with Virginia, tax hikes in the name of transportation don’t always go towards the intended projects. Bureaucrats have a way of spending it on something else.