Will it fly?: Pennsylvania’s Rendell Proposes $1 Billion in taxes to fix roads

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With 10,000 miles of the state’s roads in poor condition, Pennsylvania Governor Ed Rendell thinks it should raise a billion dollars in new revenue from taxes on drivers and oil companies. In an interesting twist, he wants to legally bar oil companies from passing along their increased costs to consumers.

For the lame-duck (term limited) Democratic governor, it may seem a move rather late in his eight-year tenure. The state’s roads have been historically in poor condition. And it is less than a third of what the state needs: those roads, together with 5,646 structurally deficient bridges, would really cost $3.5 billion to fix. But Pennsylvania transportation head Allen Biehler says that it would be politically unfeasible to ask for more than that during a political year. The proposal is to draw an 8 percent tax on oil company profits, plus vehicle registration, drivers license and certificate of title fee hikes borne by motorists.

Placing a corporate net income tax liability on a single industry has precedence. Insurance companies already pay special taxes in lieu of a corporate net-income tax.

The new money would be split 70-30, the larger share going to road and bridge repair, the lesser amount for improving the state’s mass transit systems.

There have been attempts to raise additional funds for road and bridge repairs in the recent past. A proposal to collect tolls on Interstate 80 was passed by the Pennsylvania legislature in 2007, but was rejected by the federal government (which funded its construction). Similar challenges may be mounted in the courts to the new proposals. And the political position of legislators in an election year suggests the bill will be stalled until after Election Day and possibly even until a new administration takes over in 2011. An editorial in the Philadelphia Inquirer says that would be folly, particularly if the Republicans prevail, because it would likely sink tax hike proposals altogether.

A bipartisan poll of state residents found that 74 percent of voters want to close what they consider to be a tax loophole on oil company profits. Slightly less than half (48 percent) believe that fees on motorists should be hiked, but even a slight majority of Republicans polled (51 percent) said they felt spending on roads and bridges should be increased.

Road repairs not done when pavement first begins to deteriorate can multiply over time as nature – rain, heat and freeze thaw cycles – combines with the abuse of traffic to increase the damage. The expenses for road repair can increase seven-fold from such delays.

For more on this story:

Pittsburgh Post-Gazette: Rendell pushes new tax, fee hikes to fund roads, transit

Philadelphia Inquirer: Highways need transfusion

Pittsburgh Business Times: Rendell wants oil co. tax for transport

Reuters news agency: Pennsylvania voters back infrastructure hike: Governor