The Gas Tax Bill – A Guide for the Perplexed
● The Senate’s bill raises gas tax by 12 cents per gallon
● Includes large increases in array of fees
● Calls tax a ‘fee,’ allowing Infrastructure Bank to create more debt
● Includes convoluted tax ‘off-sets’
● Includes no reform of DOT
After much debate and maneuvering, the Senate finally passed its version of a gas tax increase. Its passage is being treated as a triumph for South Carolina’s roads and infrastructure, but a look at the bill’s details reveals something else.
The Senate bill hits the taxpayer at every stage of the driving process. Here’s a rundown:
► Raises the gas tax by nearly 72 percent (from 16.75 cents to a total of 28.75 cents per gallon), with built-in automatic increases (up to 2 percent) tied to inflation.
► Converts the vehicle sales tax into an “infrastructure maintenance fee” for vehicles, motorcycles, trailers, and semi-trailers and doubles the cap from $300 to $600. The name change would permit revenue collected from the “fee” to be bonded by the STIB, since revenue from taxes can’t be (see below).
► Doubles the sales tax cap for boats, airplanes, etc. from $300 to $600.
► Doubles driver’s license fees from $12.50 to $25 for a five-year driver’s license. The ten-year license is shortened to an eight-year license, and the cost is raised from $25 to $40.
► Dramatically increases car registration fees from $24 to $40 for individuals under the age of 65 who are not handicapped (handicapped and elderly individuals’ fees would be increased from $20 to $36). Further, the bill requires that $16 of registration and license fees be credited to the Infrastructure Maintenance Trust Fund.
► Creates a brand new fee for fuel-efficient cars. Those who drive electric or hydrogen-powered cars would pay a biennial fee of $120. Individuals who drive hybrids would pay a biennial fee of $60. According to lawmakers supporting these new fees, individuals who drive fuel-efficient cars are not paying their fair share for the privilege of using the roads.
► Replaces property taxes for large commercial vehicles with a road use fee, payable to DMV instead of DOR.
It’s important to note the actual definition of a fee in the code: “Service or user fee’ means a charge required to be paid in return for a particular government service or program made available to the payer that benefits the payer in some manner different from the members of the general public not paying the fee. ‘Service or user fee’ also includes ‘uniform service charges.’” Since literally every person in the state benefits from roads, calling the gasoline tax a “fee” in this sense is clearly disingenuous.
There’s a reason for this sleight of hand, though. The State Transportation Infrastructure Bank can only use non-tax revenue to issue revenue bonds, and as a result of last year’s bond bill DMV fees constitute a major funding source for the STIB. In fact, 80 percent of the vehicle sales tax is directly funneled to STIB in this bill – after renaming it “infrastructure maintenance fee” and doubling the cap.
For the “fee” revenue not directly appropriated to STIB (at least at the moment), the bill creates the Infrastructure Maintenance Trust Fund to be funded in part by the tax and fee increases in the bill. Monies from the Infrastructure Maintenance Trust Fund may be directed to the State Highway Construction Debt Service Fund, which is used to pay “the principal and interest, as it comes due, on bonds issued for the construction or maintenance of state highways, or both.”
Legislators also included tax relief or off-sets in the bill – but not for everyone. The average South Carolinian may wonder why, if the point of the bill is to raise revenue, the same bill should lower taxes and fees. The answer: The scheme is supposed to look “revenue neutral” when in fact, for taxpayers, it’s anything but.
► A brand-new $40 million tuition subsidy program in which college and tech school students would receive up to $2,750 apiece.
► A new motor fuel tax credit that, in order to receive it, would require the taxpayer to save (a) all gas receipts and (b) all receipts from “preventative maintenance” on a vehicle (defined as “new tires, oil changes, regular vehicle maintenance, and the like”). All this documentation would be sent to the Department of Revenue on forms the agency would create, and the taxpayer would be refunded his preventative maintenance cost, up to 150 percent of his or her gas tax cost. This off-set is so cumbersome and complicated that it’s hard to imagine very many people actually taking advantage of it. The credit is capped at $390 million for all taxpayers.
► Other ill-defined, complicated, and narrowly targeted tax favors, including a small reduction in the manufacturing/business property tax.
There is, in short, no tax relief in the bill. The tax cuts are narrowly targeted instead of being across-the board, and instead of bringing taxpayers to a more low-rate overall tax burden, the structure ensures that the few taxpayers who do benefit will do so at the expense of the rest.
The majority of the DOT commission is appointed in exactly the same way: the governor “appoints” after lawmakers select their desired commissioner, and the Joint Transportation Review Committee (controlled by two unaccountable lawmakers) finalizes the appointment. The bill would allow the governor to remove commissioners and adds one more commissioner to be directly appointed by the governor. The presence of an additional bureaucrat on a commission that should not exist in the first place is hardly reform.
The bill does add that commissioners “shall represent the transportation needs of the State as a whole and may not subordinate the needs of the State to those of any particular area of the State.” Of course, the reason road funding is a contentious point in the first place is that the DOT commission doesn’t attend to the “needs of the State as a whole” but favors some districts and counties over others. Simply decreeing that this shouldn’t happen isn’t reform. Indeed, only when road-funding decisions are made by officials accountable to one statewide official – the governor – will such a decree have any meaning.
The legislation similarly purports to ban DOT commissioners from profiting from office, as if that’s not already illegal.
The bill’s transparency measures wouldn’t change much if anything. The process for all state contracts for road construction, maintenance, or repair should be open to public inspection – no exceptions. While this bill directs DOT to publish annual statewide and countywide expenditure reports and their contractor list, the public would still be kept in the dark as to how and why those particular projects were selected to begin with – arguably the most important part of the infrastructure funding process.
This bill, if passed, will hit the taxpayer hard without ensuring the infrastructure reform South Carolina has been demanding. However, it passed the Senate with an overwhelmingly veto-proof majority and, if the House does not concur with what the Senate did, will go to conference committee next to be reconciled with the House version.