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Minnesota doesn’t need Gov. Walz’s gas tax hike

You may recall that, in December, Minnesota’s state government was forecast to take $1.5 billion more from the state’s taxpayers in the next two years than it needs to cover its projected spending over that same period. What should state lawmaker do with this excess of money? Should they use it to fund extra spending? Should it be given back to the people it is to be taken from? Should they hold their horses and wait to see how closely the forecast matches the reality?

This week, we found out what Gov. Walz wants to do with it. Incredibly, not only does he want to spend the lot, he wants to spend even more.

As the Pioneer Press writes,

Under Walz’s plan, the next two-year budget would jump from $45.5 billion to $49.5 billion with much of his proposed increases focused on education, health care and what the governor calls programs to improve “community prosperity.”

So, even with a projected budget surplus of $1.5 billion, Gov. Walz is planning to take more of your money off you.

Walz also wants to raise gas taxes by 20 cents per gallon and increase registration fees and vehicle sales taxes to fund a 10-year, $11 billion transportation plan.

This is a huge hike. As WCCO reports,

Right now, Minnesota’s gas tax ranks right in the middle: Number 28 in the country. It’s on the low end of gas taxes in the Midwest. Raising it by 20-cents a gallon would move Minnesota to the top five in the nation, and cost the average driver $156 a year.

But that’s not the whole story. It’s not just the gas tax that might go up. The taxes on your new car may go up as well.

Gov. Walz is proposing to raise the vehicle registration tax, too, and the vehicle sales tax, and how much you pay for license tabs.

On a common Minnesota vehicle, like a $28,000 Ford F-150 truck, both the sales tax and the registration tax would jump about $105 each, according to the Minnesota Automobile Dealers Association. That’s a total of about $210 more in taxes per vehicle.

Also, license tab fees would stay higher for longer periods of time because the state wants to slow down the vehicle depreciation schedule.

“Minnesota’s crumbling infrastructure is putting our safety at risk,” Gov. Walz said in defence of these hikes. And, as WCCO notes,

It’s true. Civil engineers recently reported parts of Minnesota’s transportation system are in “poor” condition. And any gas tax hike could only be used to fix roads and bridges, which the report graded “C” and “D+.”

Where has the money gone?

If you’ve taken a bone-shaking ride on South Robert Street or stretches of I-90 recently, you might agree. But, if you look at the numbers, it stretches credibility that the state’s government is so bereft of funds that it cannot fulfill a core function like maintaining the roads without a fresh, deep dip into the taxpayer’s pockets.

As I wrote in December,

Data from the Minnesota Department of Revenue shows that, in real terms, Minnesota’s Fuel Excise Tax revenues in 2017 were higher than in 38 of the last 44 years. Indeed, eight of the top ten years for revenue since 1974 have been in the last decade.

Figure 1: Motor Fuels Excise Tax revenues, billions $2017 

Source: Minnesota Department of Revenue

That same data also shows that state tax revenues more broadly have risen by 31% in real terms since 2010 (Figure 2) and in real per capita terms by 25% (Figure 3) over the same period.

Figure 2: Total State Tax Collections, billions $2017

Source: Minnesota Department of Revenue

Figure 3: Total State Tax Collections per capita, $2017

Source: Minnesota Department of Revenue

This is complicated a little by federal taxes and spending. Using Census Bureau data, Figure 4 shows that, in real terms, the Minnesota state government’s Total Revenue in 2017 was higher than any year previously. Our state government’s Total Expenditure in 2017 was higher than in all but one previous years.

Figure 4: Minnesota Total Revenue and Total Expenditure, billions $2017

Source: Census Bureau

Now that we have seen Gov. Walz’ budget, the judgment must be the same as it was back in December

In terms of revenue the politicians in Saint Paul have never had it so good. Why, then, are they pleading poverty and planning to take more of their citizen’s money from them? If they are having trouble funding a core competency such as roads, that would seem not to be the result of a shortage of revenue but of a mistaken allocation of the revenue they have. With all the cash they get from us and the surplus they are projected to get, there is no excuse for soaking the state’s citizens afresh to pay for something so basic.

John Phelan is an economist at the Center of the American Experiment. 

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