Minnesota nearing big change in fuel tax collection?

By Keith Goble, Land Line state legislative editor | 4/7/2014

A transportation funding plan drawing consideration at the Minnesota statehouse would overhaul how the state collects funds to pay for road, bridge and transit work.

The Senate Transportation and Public Safety Division voted 10-7 along party lines to approve a bill that would raise about $1 billion over four years to boost state coffers largely through a change in how fuel taxes are collected.

The state now charges a fuel excise tax at a rate of 28.5 cents per gallon.

Sen. Scott Dibble, DFL-Minneapolis, offered a bill that would raise new revenue by also applying a gross receipts tax to fuel purchases. The change would allow the tax to keep pace with inflation.

Specifically, SF2107 would add a 5 percent sales tax to fuel purchases. The change is expected to add about 12 cents to the cost of a gallon of fuel.

Dibble said the new tax would help alleviate funding problems in recent years caused by changing driving habits and more fuel efficient vehicles.

Republicans are opposed to the tax plan. Rep. Michael Beard, R-Shakoppe, cautioned that the existing fuel tax is constitutionally dedicated to transportation. He said that a sales tax could result in funds being diverted to other uses.

Dibble said the matter boils down to choosing one of two paths for the state.

“We’re not keeping up with what folks want and what folks need,” Dibble testified during the Senate hearing. “Our transportation system can be the thing that bolsters our economy or it can become the constraint that bottlenecks it. We want to avoid that.”

The bill’s chances of passage are considered to be poor. Gov. Mark Dayton has said more discussion on the issue is needed during a non-election year.

The governor’s opposition comes despite the recommendation two years ago from a transportation finance advisory group he created to raise the fuel tax rate.

In an effort to address an estimated $50 billion shortfall for roads, bridges and transit over the next 20 years, the 19-member panel recommended that the state raise the fuel tax over multiple years to nearly 70 cents per gallon.

SF2107 awaits further consideration in the Senate.

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