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Facts Prevail as Minnesota Moves Forward on Transportation

February 26, 2008 By Conrad deFiebre, Transportation Fellow
It took 20 years of neglect; crumbling, congested roads and the tragic collapse of the state's busiest freeway bridge, but bipartisan Minnesota legislators joined together Monday to enact a transportation funding policy that will begin to move our economy into the 21st century.

On the third try since 2005, the House and Senate finally overrode the latest veto from Gov. Tim Pawlenty, despite his stubborn insistence that funneling $660 million a year in new investments into roads, bridges and transit - at a time when the annual state funding shortfall for those items approaches $3 billion a year - is "overreaching."

Pawlenty's veto message Friday at least retreated from his earlier assertions that raising fuel, vehicle and sales taxes for vital transportation infrastructure would hurt our economy. Perhaps that was too much of a stretch given that the Minnesota Chamber of Commerce swung its considerable weight behind the measure.

Congratulations are due the state chamber and its many local affiliates who reversed their earlier opposition and became the key forces behind passage.

Repeated studies have shown that public spending to reduce congestion, improve travel safety and ease the mobility of goods and workers pays economic benefits far beyond the costs - as much as an 8 to 1 payoff, according to the Texas Governor's Business Council. And, as recessionary fears loom, this package will put thousands of Minnesotans to work on vital infrastructure that will pay dividends for decades to come.

Still, until the last two-thirds supermajority override vote was tallied on Monday, critics continued a drumbeat of exaggeration and outright falsehoods in an effort to scuttle the bill again.

It would enact the largest tax increase in Minnesota history, we were told. Technically, that may be true, but it follows a disastrous cumulative reduction of more than $7 billion in state taxes for transportation over the past 20 years, according to Growth & Justice calculations that factored in inflation and increases in driving on Minnesota streets and highways.

Because the gasoline tax does not rise with inflation, it has slipped in buying power for 20 years, as if on autopilot. Among the major disappointments in the compromise bill was an abandonment of inflation indexing in the gas tax, which several other state, including Wisconsin, have adopted. This means the gas tax debate will likely be revisited before many years pass.

Pawlenty, meanwhile, complained that the phased-in hike in the gas tax from 20 cents a gallon to 28.5 cents would "propel Minnesota from a state gas tax ranking of 28th in the nation to a ranking of 7th."

I don't know where the governor gets his figures, but the latest report from the authoritative American Petroleum Institute puts Minnesota's gas tax at 35th in the nation. The 2-cent-a-gallon increase that takes effect April 1 pushes that up to a tie for 30th, and the 3.5 more cents that kick in come fall will put the state at 21st. Even if no other state raises its gas tax over the next few years that the final 3 cents a gallon will hit the pump, Minnesota will still come in 17th, equal to the current U.S. average.

Opponents also protested that legislators should delay their votes until the state general fund budget forecast is issued this Thursday. It's expected to show a growing projected deficit, but one that the transportation bill will have nearly no effect on. The alternative to the bill that many of the same opponents offered, however, was to transfer money from the general fund to transportation. How is that reasonable in a time of deficit?

Furthermore, the critics issued impassioned pleas on behalf of the least fortunate Minnesotans - those facing job losses, foreclosures and loan defaults -- saying they will be bankrupted by the tax increases.

That's not likely, for a number of reasons. Folks in severe economic straits won't be buying new cars, which is the only trigger for registration fee increases. A quarter-cent boost in the Twin Cities sales tax won't apply to the necessities of food or clothing, and it will increase the options for economical transit riding as market gasoline prices likely continue to soar many times higher than the rise in the tax bite. And good-paying construction jobs funded by this bill will rescue many a family from unemployment or underemployment.

Finally, the biggest whopper of all came from the merry pranksters at the Taxpayers League of Minnesota. It claims this funding measure is 50 percent steeper than the one Pawlenty successfully vetoed last year. Let's do the math: Decreasing the Twin Cities sales tax increase from a half-cent to a quarter-cent trimmed out about $110 million a year. The increase of 1 cent in the gas tax at full implementation three years hence will add $32 million annually. Dropping county-imposed wheelage taxes of $20 a year cuts out far more than a $20 excise tax on new vehicle purchases in the metro area will pile on.

But wait! There a provision for up to a half-cent transportation sales tax in the 80 non-metro counties - if the voters approve in a referendum. Pawlenty said that could add $1.8 billion over ten years to the tax burden. Well, if you think if that's going to happen (even if it does, it'll be the will of the people), I've got a bridge over the Mississippi River I'd like to sell you.

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