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DFL trims gas tax hike

ST. PAUL - Minnesota drivers would pay up to 8.5 cents a gallon more for gasoline under the House version of an evolving transportation funding plan coasting through the Legislature.

Bowing to pressure from legislators and transportation advocates, Democratic-Farmer-Labor Party lawmakers on Monday said they are stripping an automatic inflationary gas tax increase from their $8.3 billion plan for road, bridge and transit projects.

Removing the controversial measure, called indexing, was done to get support -- mostly among Republicans -- for the funding package as it nears floor votes Thursday and an anticipated veto override attempt, the bill's authors said.

"It'll make them feel better because they don't care for indexing," said Rep. Bernie Lieder, DFL-Crookston, the House transportation chairman. His bill includes a nickel-per-gallon gas tax hike this year, plus a 3.5-cent hike in the coming years to repay state-borrowed funds for transportation projects.

Sen. Steve Dille was an example of what the bill's supporters wanted. The Dassel Republican said he would back a higher gas tax before allowing it to rise with inflation.

"I think we should vote on tax increases and not put them on autopilot," Dille said after a funding package was approved by the Senate Finance Committee. "I would guess it would make it easier for Republicans to vote for it if that was out."

Sen. Steve Murphy, DFL-Red Wing, said the gas tax index will be removed from his bill when it is heard Wednesday in the Senate Tax Committee. His version still will have a nickel hike this year and up to another nickel in coming years to repay state-borrowed funds, he said.

"I think that we pick up more people now that the indexing it out than we lost because they want it in," Murphy said.

But Democrats will not pick up every lawmaker's vote.

"It's not enough," said GOP Rep. Dean Simpson of Perham of removing the inflationary increase.

Simpson is lead Republican on the House Taxes Committee that approved Lieder's bill on a divided voice vote. Simpson said Democrats were concerned some of their own members objected to an inflationary gas tax hike.

"The reality of this whole bill is coming to play," he said.

A gubernatorial veto is expected. Gov. Tim Pawlenty, who opposes a transportation package with tax increases, said "it's pretty clearly headed in that direction."

"They've made it very clear that they believe I'm irrelevant to the discussion and they're going to put a bill on my desk that fits their definition of what they want to do and believe they can override my veto," Pawlenty told reporters. "I wish that wasn't the case, but that appears to be the trajectory they're on."

If the bill proceeds as expected, it is unclear if Democrats can convince enough Republicans to help override a veto.

Minnesotans would pay more for gasoline with the DFL bill, Murphy said, but they will see transportation improvements.

"They're definitely going to notice a difference because their roads are going to get fixed," he said. "That's the bottom line here, fixing roads and lowering the (vehicle crash) fatality rate."

The state's gas tax is 20 cents a gallon. Indexing would have resulted in a rate of 31.4 cents a gallon in 10 years, nonpartisan legislative experts said. By removing the inflation provision, the tax should be 28.5 cents a gallon by 2018.

Democrats' transportation funding package would increase the license tab fees owed on new vehicles registered in the state; those fees would be higher on luxury vehicles. Minnesotans who drive their existing vehicle or buy a used vehicle registered in Minnesota would not see an increased tab fee under the plan.


The finance package also would increase the sales tax in Twin Cities-area counties without voter approval, and allow counties outside the Twin Cities to raise their sales tax, but only if voters approve. That revenue would go toward rail and bus projects.

Rep. Morrie Lanning, R-Moorhead, said the House Taxes Committee decided last year to approve only a few local-option sales tax hikes, but took a different position Monday by approving the transportation bill with sales tax hikes that do not require voter approval. That will invite other municipalities to seek local sales tax increases, he said.

"I fear that what we're doing is opening the door wide open again," Lanning said.

Lawmakers say the gas tax is regressive, meaning it disproportionately affects lower-income Minnesotans. But Rep. Paul Marquart said the transportation funding package will also provide property tax relief. Property taxes also are regressive, the Dilworth Democrat said.

Property tax revenue currently is the largest source of funding for local road and bridge projects because counties, cities and townships are not getting enough state transportation dollars, Marquart said. The transportation package will keep property taxes from rising, he said.

"You're not going to see a deduction on your property tax bill, but it is going to provide property tax relief," Marquart said.

Prior to the House Taxes Committee vote Monday, Simpson held up the bill and said the gas tax increase gets a lot of attention, but the bill's other tax increases are going largely unnoticed.

"The average public has no idea what's in this bill," Simpson said. "The gas tax is just a small part of this."

Murphy and Lieder say they are trying to keep their plans similar to limit the need for House-Senate negotiations after the bills are passed off the chambers' floors.