Gov.-Elect Walz’s Gas Tax Hike Plan Faces Opposition

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Gov.-elect Tim Walz continues to express support for raising Minnesota's gas tax to better address the state's infrastructure and transit needs, but some policy observers want lawmakers to put the brakes on the idea.

Walz, a Democrat, emphasized the issue during the midterm election campaign by suggesting that Minnesotans need to have an honest discussion about more funding for long-term projects such as bridges and roads.

Walz's transition team did not respond to requests for details about Walz's tax proposal, but he spoke about the issue during recent interviews with Minnesota broadcast outlets.

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"It's clear that Minnesota's infrastructure is behind where it needs to be," Walz said on television station WCCO in Minneapolis. "That causes congestion, that causes accidents."

Speaking to KMSP Fox 9 in Minneapolis-St. Paul, the governor-elect said Minnesota residents are willing to pay their fair share of taxes provided that they get assurances the funds will be spent wisely.

"I've wanted to have the conversation on transportation in this state, and I said I think we need to look at the gas tax and have that honest discussion because where else is that money going to come from?" Walz said. "… If we do nothing on transportation in this nation, we spend hundreds of millions of dollars a year in idling taxes, so it costs you anyway."

Members of Minnesota's state Senate, however, may not fall in line to support a gas tax hike. Republicans control the Senate by a one-vote margin, based on the Nov. 6 election results.

Asked about Senate Majority Leader Paul Gazelka's views on a gas tax increase, the spokeswoman for the Senate Republican Caucus, Katie Fulkerson, pointed to Gazelka's statements during a Nov. 8 press briefing in the Capitol.

"I do think revenue moving toward transportation is important," the majority leader said. "I just don't think we need to raise taxes to do it."

Minnesota has some of the highest tax burdens among the 50 states, he said, and lawmakers need to make sure that Minnesota remains competitive.

"We're making the case that the Democrats were asking for new revenue the last few years, and we've proved that you can increase funding for education without new revenue," Gazelka said.

Minnesota's gas tax is currently 28.5 cents per gallon, which is almost exactly the national average. Minnesotans pay 47 cents per gallon in state and federal gas taxes combined, according to the U.S. Energy Information Administration.

Phil Krinkie, president of the Minnesota Business Alliance and a past president of the Taxpayers League of Minnesota, also expressed opposition to a gas tax hike. No details of Walz's tax plan have surfaced so far, according to Krinkie.

"I'm just not sure why Gov. Walz would start out with anything as challenging … as a gas tax increase," he told Watchdog.org, noting that the last gas tax increase occurred a decade ago and only after a veto override.

A more pressing matter is that Minnesota residents remain in limbo over exactly how they will calculate their state income taxes in the wake of federal tax reforms, Krinkie said. The current governor, Mark Dayton, vetoed tax conformity legislation.

"The governor(-elect) should be first and foremost looking at tax conformity with federal taxes," he said.

Bonding for transportation projects has been used successfully in the past, according to Krinkie, and it's a logical way to pay for highway projects.

"I just think that over the past 20 years, or 25 years, a gas tax has been a very difficult and arduous task to get passed in Minnesota," he said.

The gas tax can also be more burdensome for lower-income residents, Krinkie said.

"Gas taxes do tend to be a bit regressive, particularly for people in rural areas who have greater distances to drive to work," he said.

In addition, some of the state Department of Transportation's list of projected infrastructure needs may be exaggerated, according to Krinkie, who questions why infrastructure should have a dedicated funding stream while other public services depend on the state's general fund.

"Why take one type of project or need and dedicate funding to that?" he asks.

The American Society of Civil Engineers this year published a report on Minnesota's infrastructure needs, giving the state a "C" grade overall. That's slightly better than the national average, but Seth Spychala, a former president of the ASCE's Minnesota section, said the state faces a serious infrastructure funding gap.

"Roads in particular was a D-plus," Spychala told Watchdog.org. "The highest grade was aviation, and the lowest grade was roads."

The annual funding gap for roads in Minnesota is $885 million, he said.

Spychala welcomed Walz's openness to a gas tax increase to generate more infrastructure funding. The ASCE sees the gas tax as one of many ways to fund road and bridge work, especially considering that there has been a long-term shift away from using federal funds for essential infrastructure projects.

"ASCE is very excited about potentially having infrastructure be a top priority at the Capitol," he said. "… (Minnesotans) all use infrastructure, everyone uses infrastructure. It's critical, and it makes the economy work."