State's gasoline tax could double - and then some

The proposed 10-cent-a-gallon gasoline-tax increase moving through the Minnesota Legislature could end up being higher than that, maybe more than twice as high.

Tucked away in a big transportation funding bill being fast-tracked to a Senate floor vote today are future increases in Minnesota's gas tax that could push it from 20 cents a gallon to more than 40 cents over 10 years, higher than any state's current bite at the pump.

"I'm not trying to fool anybody," said Sen. Steve Murphy, DFL-Red Wing, sponsor of the measure that would increase funding for roads and transit by $1.5 billion a year once it was fully implemented in the next decade. "There's a lot of taxes in this bill."

Today, the full Senate will debate the measure that would increase the state gas tax -- fixed at 20 cents a gallon since 1988 -- by a dime on July 1.

After that, additional bumps would be tied automatically to inflation and to debt service on up to $2.2 billion in borrowing for highways.

The bill also includes these other levies, all dedicated to roads, bridges and transit:

• Higher registration renewal fees on future new car purchases, but no increases on currently owned vehicles.

• A half-cent rise in the general sales tax in the seven-county Twin Cities area, imposed without a voter referendum, plus a $20 excise tax on new vehicle sales in the metro.

• Local-option authority for half-cent sales-tax increases in the rest of Minnesota, subject to voter approval.

• Authority for all 87 counties in the state to impose a $20-per-vehicle annual wheelage tax. Three suburban counties levied the current maximum of $5 per vehicle last year.

• Increased fees for leased vehicle registrations, license plates, titles and drivers' licenses, plus a $20 reinstatement fee for a license suspended for theft of gasoline.

The bill passed the Senate Taxes Committee on a divided voice vote Thursday after the chairman, Sen. Tom Bakk, DFL-Cook, tried in vain to reduce the immediate gas-tax increase to 5 cents a gallon.

"The public is more willing to accept a nickel," he said. "A dime is never going to become law."

He offered his amendment as an alternative, but Republicans and DFLers united to vote it down. Bakk cast the lone vote in favor.

House GOP leader Marty Seifert, R-Marshall, said gasoline- and sales-tax increases for transportation were among "a cornucopia of tax increases" proposed by DFLers that would add more than $1,000 a year to a family's taxes.

"Ultimately, these things are not going to become law," Seifert said.

But House Majority Leader Tony Sertich, DFL-Chisholm, said it's too soon to tell which tax proposals might survive a veto. "I don't think we even know what a final bill would look like," Sertich said.

Meeting the need

Republican Gov. Tim Pawlenty's own no-new-tax transportation plan calls for $1.7 billion in borrowing over 10 years to accelerate more than two dozen highway projects. The money would be paid back mostly via a transfer of existing motor vehicle sales taxes to roads and transit authorized by voters in November.

Murphy said that falls far short of the state's overall transportation needs, which he pegged at $1.8 billion in new money every year.

When Senate Minority Leader David Senjem, R-Rochester, suggested that the gas tax could reach as much as 48 cents a gallon by 2018 under the Senate bill, Murphy didn't dispute it, saying: "That just shows what the need is."

A Senate fiscal analysis shows that the bill's debt-service provision could tack 8 to 9 cents on the gas tax by the end of the next decade. Inflation indexing of the tax would begin in 2009. At 2 percent a year, the increase would be more than 6 cents by 2018.

A similar inflation provision in Wisconsin's gas tax has raised its levy to 32.9 cents a gallon. Two decades ago, it paralleled Minnesota's.

All state gasoline taxes come on top of a federal levy of 18.4 cents a gallon.

Senators differed over how gas taxes affect prices on either side of the state line. Murphy said Wisconsinites usually pay 3 cents to 8 cents a gallon more than Minnesotans. Sen. Debbie Johnson, R-Ham Lake, said the difference is 20 cents.

But Murphy said a fluctuating world oil market exerts a much greater effect on prices at the gas pump.

"Right now, a lot of that is going to Exxon," he said. "But we can capture some of that profit and spend it on our roads."

Veto bait?

Pawlenty has repeatedly stated his opposition to the broad tax increases envisioned in the Senate bill. It is expected to be whittled down in negotiations with the House, which has scheduled a transportation funding floor vote for Saturday.

But that may not be enough to avert the governor's veto, which could be overridden only if majority DFLers enlist Republican support in both the House and Senate.

Seifert predicted that wouldn't happen, partly because some DFLers may vote against the most aggressive tax measures.

In 2005, 10 House Republicans supported a proposed 10-cents-a-gallon increase. Rep. Ron Erhardt, R-Edina, one of the supporters, said he expects similar GOP support this year.

Staff Writer Pat Doyle contributed to this report. Conrad deFiebre • 651-222-1673 • cdefiebre@startribune.com