uhuru1701, via Flickr
uhuru1701, via Flickr

Publicola reported this week about potential fundamental shifts in thinking about our state’s revenue system.  Towards the end Josh Feit quotes grumbling from Sen. Ed Murray (D-Capitol Hill, Wallingford) and a collection of environmental and transportation organizations about the State Constitution‘s Section 40, which says that gas tax funds can only be used for roads.  In Feit’s words:

Consider: The current working transportation budget for 2009-11 puts only 4.4 percent of the $5.9 billion total  into transit. And even if legislators were more-transit friendly, the rules governing transportation funding — Constitutionally, the gas tax cannot be used on transit— would have only permitted them to put about 7.3 percent of the money into transit.

Given that 10 percent of all work trips in the Puget Sound region are transit (and 57 percent of all trips are non-single occupancy vehicle—60 percent in Seattle during morning rush hour); and given that vehicle miles traveled has remained flat in the last few years while transit ridership across the state has spiked by 15 to 20 percent, the fact that transit spending is in a straight jacket doesn’t fit our state’s changing profile.

Combine these transit  numbers with the new state mandates and goals about reducing global warming (particularly by reducing vehicle miles traveled), and the transit funding equation seems as unsustainable are the general fund.

Of course, I would be ecstatic if applications of the gas tax were broadened through a constitutional amendment.  At the same time, I understand that amending the constitution is hard.  Meanwhile, I think there are two important points to make:

  • As Feit points out, the budget’s transit funding is $171m below what is Constitutionally allowed, so the attitude of legislators is currently more relevant than Constitutional restrictions.
  • If there was sufficient interest in boosting transit funding but not enough to change the Constitution, there are pretty simple maneuvers available.  For instance, the Legislature could lift the sales tax exemption on gasoline and reduce the gasoline tax by an equivalent amount, and sales tax revenue has fewer strings attached.

Even if the tax revenue were “blown” on schools or something, Metro and ST would capture about 20% of the revenue in their respective districts thanks to their sales tax authority.

The biggest criticism here is that sales tax per gallon varies wildly with the gas price, making for a volatile revenue stream.  However, gas prices are probably near bottom, so it’s unlikely that programs funded with these streams will be left high and dry.  Furthermore, the sales tax is roughly indexed to inflation, whereas the fixed gasoline tax often faces declining purchasing power.

30 Replies to “The Gas Tax and the State Constitution”

  1. How much do town and cities spend on roads? Can the state transfer gas tax money to local governments for their road spending?

    1. And how much do they spend on Emergency services that almost solely exist now to wipe up the carnage from automobile-caused incidents. Good ol’ house- and building-fires are rare now thanks to improvements in smoke-detection and sprinkler systems!!

      1. 911 and EMT services is one of the popular items that gets it’s own vote for a property tax levy (as opposed to KCFD which just got added because the State said it was OK). I think you’ll find that heart attacks far out weigh response to traffic accidents. Having talked with a fair number of fire fighters my impression is a large number if not a majority of callouts are Nine Whine Whine calls. A classic, “I have a doctors appointment and want you to take me there”.

        Amazing the argument on one side is that car users don’t pay enough of the cost and then out of the other side of the mouth comes the suggestion gas taxes should fund transit. The sales tax is regressive but somehow the gas tax should be higher to be socially responsible. The last thing anyone would bring up is fares covering the cost.

      2. I appreciate the anecdotes (mine and yours) but someone needs to start collecting hard numbers back by statistical analysis.

        Also to your point about the sales tax; I wonder why the sales tax is not applied to gasoline purchases? It is a transaction that would be taxed if one was purchasing any other liquid. California applies sales tax to gasoline and diesel; why not the other west coast state with a existing sales tax, Washington State??

        Or is it because, in a state that has traditionally used property tax for funding, vehicles, the second most expensive piece of property that most people own (most expensive for some) has been exempt from property tax since the cowards in Olympia genuflected to the watch salesman of Mukilteo those many years ago?

      3. Bernie,

        1) Cigarette taxes are regressive too, but they discourage behavior with large negative externalities. That’s much less the case with sales tax.

        2) If you want to get behind a progressive income tax to fund transit I’ll get behind that too, but the point is that transit funding is highly progressive, regardless of where the funding comes from.

      4. Sales tax in WA doesn’t include food, rent, medical expenses or education. Structuring an income tax to be progressive entails a tremendous amount of wrangling and bureaucracy. How do you deal with retirement income?, amended federal returns, establishing residency (students, military, dual home ownership, etc.), collection & enforcement (i.e. self employed and undeclared income). The gas tax is high (and regressive) but probably not high enough. The price of gas has wild swings ($2-$4 per gallon in the last year) but consumption is steady in comparison. The issue is it doesn’t get raised when needed to keep up with inflation. Metro areas are the ones with the highest cost of road construction and maintenance. They also tend to be the most likely to provide a transit alternative. Why not let local areas have the option of adding a sales tax or per gallon adder like Oregon does with the money earmarked for roads/transit. There will be a built in check on this because cities will have to make the marginal cost of gas no higher than driving elsewhere to fill up.

        I think any attempt to modify the State constitution to allow an income tax would have to start with the prohibition on State (not local) sales tax. CA has the highest gas tax by a wide margin of any of the west coast states. (Oregon has a “hidden” gas tax in prohibiting self serve which ends up keeping prices on par with WA). CA has a State sales tax higher that WA (8.25% vs 6.5%) and it has a higher income tax than Oregon. The general perception is that’s where WA is headed if we simply add an income tax.

      5. For what it’s worth, Oregon pushes all the income tax work onto the IRS or at least did when I lived in Oregon. You basically fill in your IRS 1040 (or whatever) adjusted income.

      6. That doesn’t work for a number of special State exemptions, Oregon for example has different types of pension and retirement income exemptions not reflected in 1040 adjusted earned income. For an example of how twisted a State income tax code is likely to become take a gander at our B&O tax. Even our sales tax ends up with special interest exemptions; like the deduction for used car trade in at a dealer or tax free purchases for materials on some State construction projects.

      1. Except that only 3¢ goes to city asphalt, and 5¢ goes to county asphalt; the rest of your 12 cents goes to “Administration” and “Transportation Improvement Board” (in other words “Planning and justifiying more asphalt”).

        So Seattle gets 3¢ while Greenwater gets 5 cents? Karl Marx himself couldn’t come up with such an ass-backward distribution.

        So the area that has the densities to avoid needing asphalt and has the higher property-tax-generation-per-acre, gets screwed when it comes to getting money for more (or rerairing) asphalt?

        Remember also that once covered in asphalt for moving more automobiles, land that was once on the property roles generating property tax, gets taken off the property tax roles and no longer generates revenue.

        And both the UP and the BNSF Rights-of-ways are ON the property tax roles; the two railroads are often the biggest taxpayers in some municipalities and counties in Washington State.

      2. So the area that has the densities to avoid needing asphalt and has the higher property-tax-generation-per-acre,

        Rural King County doesn’t have anywhere near the property tax generation per acre of the cities. The tax paid is on assessed value which are way higher in incorporated areas. Of course it costs more to plan roads in a city than to chip seal a stretch of road in a rural area.

        Remember also that once covered in asphalt for moving more automobiles, land that was once on the property roles generating property tax, gets taken off the property tax roles and no longer generates revenue.

        No, the land becomes more valuable once subdivided and generates way more property tax. Most road widening doesn’t change anything with respect to land boundarys because county setbacks generally absorb the road. The land owners yard gets chewed up but the county still gets it’s taxes.

  2. It’s not THAT hard to change the state constitution. It could be done as a formula, permitting gas tax revenues to be applied in some proportion of miles traveled per your explanation above. Especially, if the money goes back to where it came from no we do not penalize the rural areas.

    Sales taxes are the most regressive tax structure imaginable. Given that revenue streams are drying up right and left for life and death type services, people are going to start demanding clear revenue streams that make sense, that tie to use, etc. Basically, transparency in the budget is going to become an issue and I don’t think general sales tax revenues being allocated to tranit would be high on the list, beyond those that we explicitly voted for. The reason the portion to transit goes down in s shrinking economy is that transit goes lower on the list.

    1. I believe a constitution change takes a state-wide vote, which means it’s expensive and likely to get pushed through a pretty wild campaign.

      1. @Andrew. That’s correct. Article 23, Section 1 of the Washington State Constitution prohibits an amendment to the constitution unless 2/3 of both the House of Representatives and the state Senate approve the amendment, and a majority of the voters in the next general election concur. See http://www.leg.wa.gov/LawsAndAgencyRules/Constitution.htm.

        So political energy should not be expended on an amendment. Rather, transit advocates should lobby the legislature to remove the sales-tax exemption for gas, as you suggest, and also oppose any new gas taxes in the future.

        Does anyone know whether it’s too late for the existing gas taxes to be repealed?

  3. Do not under-estimate the growing potential for structural change in our budget policy.

    We’ve been barely getting by with a system that is bad even in good economic times, and patently untenable in a depression such as this. We have a wildly erratic revenue flow that is tied closely to the business cycle, long-term planning is thrown out the window and major investments foregone, and high usage fees stoke anti-tax revolts that then make the whole situation even worse.

    I think there will be major, major changes to our budget policy, starting next year, and that will revolutionize how government works in this state. Personally, I would like to see
    1) the burden of tax shifted to a state-income tax
    2) propositions required to be revenue neutral (or alternatively identify in the language of the proposition itself where the additional revenue is to come from, or (in the case of an anti-tax proposition) where the cuts will take place)
    3) Transportation spending allocated not on the basis of mode, but of project merit.

    I think it can happen. I think it has to happen.

    Off-topic, but important nonetheless:

    Transport Politic reports that La Hood has just made a full-throated endorsement of streetcars, and touted Portland as a model city. This is contrasted from Bush’s DOT, which pushed BRT over streetcars.


    BTW: can we a standing open thread once in awhile? There’s no place to post off-topic comments…

  4. You can pretty much forget an income tax. Just look at Oregon, all income tax and still in the pits with an even higher numbers of unemployed. Every time it’s been floated in this state it’s been shot down faster than a duck in a Boeing jet.

    Sales tax on gasoline, that’s possible but again not likely. Too regressive.

    1. It’s very interesting when we say things like the people will or will not support this or that as opposed to saying what we individually think.

      So, I think that an income tax makes sense. I will not be voting for any more sales taxes. I would support a constitutional change to combine road and transit budgeting, if it allocates a greater portion and control to locals.

      I informed my legislators and will be writing to the governor, that we need the budget to be explained in laypersons terms so that people can make choices, as opposed to all the arguing and threats about this and that program.

      1. I agree, and I wish that, instead of just a “we need more funding” argument, the powers-that-be would also show how a consistent and predictable level of funding via a stable revenue source (income) in the long run is actually cheaper than the stop-start-stop again way we’ve been doing it…

      2. Sorry to be such a crank and off topic but I had just hung up the phone from a call where I was asked to ‘connect’ with my legislators about an education issue. I just ranted at the poor woman and said I am done emailing my legislators to ask for a half a crumb for this need versus a quarter crumb for that need and all you all unions and advocates need to get it together and figure out how to present all the information to the people about all the possible revenue streams and needs.

      3. So ask Ron Sims how well running on an income tax worked. That was his major plan vs Ms. Gregoire and it doomed his candidacy to the single digits. I don’t have a recent poll on an income tax but all the previous ones have shown absolutely zero support for it.

        Oh and having laypersons make the choices? And since when are we going to be given the a-la carte menu for a state budget? I admit it would probably work if everyone was given a state budget and requirement that it add up to the state income. And then everyone was forced to allocate the money. The extremes would average out and we’d probably do a fine job of it and not fund things that we could do without. But you might find things like Light rail with less money than say jails or education which people rank higher than public transit.

      4. Regarding your first paragraph, the Times already did interview Sims, who said that the tax issue wasn’t what sunk his campaign, and then encouraged Brown to move the ball forward on that issue(as she considers a gubenatorial run in 2012).

        Regarding your second paragraph, I have no idea what you’re talking about.

  5. I have noticed that a office cubicle could be the same size (in some cases smaller) than a parking space?

    1. As I understand in office development the ratio of square footage per worker for parking vs office space is about 60/40 assuming 1 parking space per worker plus a few extra for visitors.

    2. In my building at Microsoft, there’s three floors of parking underground, plus additional parking outside. There’s also three floors of offices, but some of these floors are taken up with the lobby, cafeteria, atrium, conferences etc. At least in our case, there’s more room for cars than employees.

  6. I wonder if another possibility could simply be to start allocating gas tax money to transit projects in spite of the apparent constitutional prohibition. The constitution says the gas tax must be used for “highway purposes.” You could make an argument that improving transit service is a “highway purpose” in the sense that it can reduce the use of highways and associated maintenance costs, etc. I believe that argument has been rejected by the state supreme court, but that decision was made a long time ago, and it could always be revisited.

    There has been talk recently of pursuing a similar strategy with the income tax–just pass it legislatively and try to get the court to overrule its prior decision on the issue. I’m not saying it would work, but it might be worth a try.

  7. Gas tax needs to be:

    A) Pegged to inflation and raised every year

    (See as an example what the USPS has now done in regards to the price of a first class stamp which will now, if needed, rise every year on or about May 11th)

    B) Adjusted to compensate for improved gas mileage of most vehicles on the road.

    (This is a tough one to do since public policy is usually to encourage efficiency. But what happens in the future when more and more vehicles no longer run on taxable gasoline?)

Comments are closed.