Sunday column: Falling gas prices creating a taxing opportunity window?

Falling gas prices have may have added another option to Gov. Bill Haslam’s possibilities for short-term expenditure of the political capital he has presumably banked with a 70 percent approval rating, according to both a Vanderbilt poll released last week and last month’s election results.

Haslam has been talking about the need to restructure the state’s fuel tax system since he launched his campaign for governor in 2010, but did nothing in his first term. The state gas tax is now 21.4 cents per gallon, unchanged since 1989.

In budget hearings last week, Transportation Commissioner John Schroer, who has previously deemed the present taxing system “archaic,” said things are reaching the point where Tennessee no longer has the money to build new roads and instead can only maintain the roads it has. Haslam pretty much agreed.

“There’s no way the state can proceed on the path we’re on,” he told reporters, advising that his administration is currently evaluating whether the upcoming 2015 legislative session is the “right time” to go for a fuel tax overhaul.

Previously, it had been somewhat understood that gas tax war would be put on the shelf for another year, given the probability of plenty of controversy already in store for the legislative session — a fight over Common Core standards for sure and maybe a battle over Medicaid expansion and other stuff. And maybe a year’s delay would clarify the muddled situation on Congress doing something about the shrinking supply of federal funding to states for highway construction and maintenance.

But then gas prices started tumbling toward $2 a gallon, prompting speculation that the timing for an overhaul could be ideal.

Some states have tied their gas taxes to the Consumer Price Index or to gas prices. So when the CPI goes up or gas prices increase, the tax goes up. Tennessee has a flat-rate tax on each gallon with no provision for increases in inflation, though inflation does apply to all materials used in road construction and vehicles are getting far better mileage than they were 25 years ago.

Haslam said indexing for inflation is “one of the things being considered,” though he stressed that no decision has been made; the administration is just thinking about that and other options.

In theory, indexing could be implemented while gas prices are low with no immediate increase in the tax rate. The new law could simply put in place the existing tax as of Jan. 1, adding an indexing provision to raise the rate based on future inflation, prices or some formula in the future.

This lack of an immediate tax increase would doubtless make restructuring more politically saleable to the Legislature’s Republican supermajority, which has many members who are loath to even consider anything that can be deemed a tax increase while plotting instead to cut taxes elsewhere.

The governor says “a lot of people” would say that the timing is right because of falling gas prices, but insists that the administration doesn’t want to propose anything until “we absolutely have to” act. The current evaluation, he said, is to make a call on whether that point has been reached.

He further declared that the administration, when it does act, will not just go for a “Band-Aid,” but for a long-term solution to the revenue shortage. Suspected translation — indexing in some form or the other, and not some other proposals that have been floated quietly.

One proposal: Requiring electric or hybrid vehicles, which now basically avoid paying any “user fee” for driving on highways, to pay an extra fee for annual license plates. The state’s take on an annual license plate is currently $25 per year, and the average motorist, according to the Department of Transportation’s ‘gas tax calculator’ website, pays $300 per year in fuel taxes.

So, wouldn’t it be fair to charge electric car owners $300 a year for their license plates? And maybe bump the fee for other folks up a bit, too? With 5.8 million registered vehicles, the resulting revenue would be $5.8 million for each $1 increase in the present $25.

Ah, but that would be for the short term. The governor says he absolutely wants a long-term solution but is, for now, very equivocal about whether he wants it in the short term or the long term.

Maybe that’s how you get to a 70 percent approval rating.

Note: This column also appears HERE in Sunday’s News Sentinel.