Legendary Chicago columnist Mike Royko used to write about paying the “victim tax.”
In general parlance, it meant getting mugged, having your car stolen or your apartment burglarized.
Hoosier motorists have been on a similar trajectory. We pay the “axle tax," the “rim tax” or the “muffler tax.”
It’s the collateral damage your car or truck takes from Indiana’s deteriorating roads. My Subaru Outback has a plastic part dangling in the wheel well after a winter of pothole dodging.
But Gov. Eric Holcomb, House Speaker Brian Bosma and Senate President David Long have a plan. It’s called House Bill 1002, and it will create a 20-year road plan with several new funding mechanisms. It includes a 10-cent per gallon gasoline tax hike (last increased in 2003), increases the diesel fuel tax (last increased in 1988), adds a $15 annual vehicle fee and an annual fee for electric vehicles.
It transfers the remaining 4.5 cents of the sales tax on gasoline from the General Fund to the State Highway Fund.
A 10-cent per gallon increase would mean $4 more per month for the average Hoosier motorist, or $48 a year. According to statistics from the Indiana Department of Transportation, the average Hoosier motorist spends $491 annually on vehicle repairs resulting from poor road surface conditions. About 16 percent of Indiana’s major roads are rated in poor condition.
Indiana is home to 98,000 center-line miles.
There are 18,984 bridges with an average age of 43 years. INDOT maintains roughly 6,000, locals maintain roughly 13,000. Of those, 9.8 percent (1,861) of bridges are “structurally deficient” and 10 percent are “functionally obsolete.”
“When it comes to paying for these projects, I’m open to a menu of options,” Holcomb said during his State of the State address, stating a preference for the gas tax hike as opposed to tolling on roads such as Interstate 70.
“The fact is, existing sources of revenue are just not keeping up. Now I'm a believer that every time you ask a taxpayer for a dollar you better be darn sure you need it and are going to use it effectively for its intended purposes.”
The policy and political rationale behind Holcomb’s thinking is that if a tax hike is needed, do it in the first year of your term.
“Few government policies touch so many aspects of Hoosiers’ daily lives,” Bosma said of road funding. “Indiana’s roads and bridges connect our homes, schools, offices, factories and farms, and are indispensable arteries for our manufacturing and logistics-based economy.
"If transportation infrastructure is not placed on a fiscally sustainable path, Indiana’s current long-term economic competitiveness will be undermined. We can’t honestly call ourselves the Crossroads of America with infrastructure inadequate to meet Indiana’s 21st-century economic realities.”
Politically, this would have been unfathomable a mere eight years ago when gas prices rocketed to an average $4.54 per gallon. Since Bosma and House Road and Transportation Chairman Ed Soliday began this initiative, prices have hovered between $1.90 and $2.50 per gallon.
During the Obama administration, fracking and shale extraction increased, while Saudi Arabia and OPEC increased production. So the historic opening here is that gas prices are low. In his 2015 State of the Union address, President Obama observed that America was “number one in oil and gas” and that “thanks to lower gas prices and higher fuel standards, the typical family this year should save $750 at the pump.”
Will prices stay low? John McLaughlin of Johns Hopkins University, told Politico Magazine, “Oil prices are notoriously hard to predict, but every indication is that they will not go up markedly and may drop further. If prices go up, it will re-energize U.S. shale entrepreneurs, who have cut back investments due to low oil prices, but who are agile enough to reenter the market quickly, pushing production back up and limiting the impact of restraint elsewhere.”
Still, there is risk that prices could shoot back up. T. Boone Pickens, chairman and CEO of BP Capital, explained, “Because no political leader had the foresight to enact an energy plan when prices were reasonable, when prices went too high or low, there was surprise and distress.”
Since 1988, Hoosier governors and legislative leaders have been reluctant to raise taxes. There have been a few, and some shifts in sales tax for property tax relief under Gov. Mitch Daniels. And there have been a lot of tax cuts.
But this is a situation where you can pay on an incremental basis for better roads, or keep ‘em like they are and dodge the potholes.