Idaho lawmakers did better by transportation when they closed up shop in April than they might have imagined, and how they did it could be a lesson for Washington.
Facing a big backlog of road and bridge construction projects, the notoriously tax-averse Legislature passed a 7-cents-per-gallon increase in the gas tax and hiked vehicle fees; changes that were projected to generate an additional $95 million in revenue. Disappointed Gov. Butch Otter said the new revenues would be nowhere near what is needed to fix 750 deteriorating bridges, and as many as 25,000 miles of pavement may need restoration.
But a provision in the bill creating a “surplus eliminator” may be a windfall that gets more roads paved and bridges repaired.
The eliminator splits revenues above levels appropriated by the Legislature into two accounts: one-half for construction, the other one-half for Idaho’s budget stabilization fund: its rainy day reserves.
The state’s rapidly rebounding economy suggests highway contractors and the treasury are going to do very well if early returns are indicative. With the estimated surplus for the fiscal year ending June 30 projected to slightly exceed $100 million, the reserves and transportation accounts are expected to receive $44.9 million each.
Swelling income tax collections – the $81.2 million for May was a 29.3 percent increase over May 2014 – are driving the surplus.
Washington does not have an income tax, and voters have repeatedly rejected efforts to create one. But Democrats have suggested income tax lite: a capital gains tax that would apply to income from the sale of investments. A capital gains tax, they argue, imposes most of the burden on the wealthy in a state where incomes of the poor and middle class are hit hardest by the state’s sales and property taxes.
Democratic State Treasurer James McIntire has proposed much more comprehensive reforms that would, for starters, eliminate the state property tax and impose a flat 5 percent income tax, which would require a change in Washington’s Constitution. Without changes, he argues, state revenues will not keep up with the increasing demands for services like education.
As in Idaho, Washington’s strengthening economy is also generating substantial additional revenues, so much so Republicans are sticking by their no-new-taxes plan; one that assumes, for example, that marijuana sales will catch fire. Comprehensive reform, for this endless session, is a pipe dream.
But with an 11-cents-per-gallon increase in the gas tax the likely centerpiece of a much-needed transportation plan, a budget mechanism that resembles Idaho’s surplus eliminator should have some appeal for the future. Revenues from a capital gains tax or other source dedicated to transportation, and possibly reducing gas taxes, might be attractive to rural residents who drive a long way for necessities.
Revenue volatility, a major Republican objection, could be dampened with a reserve account.
A gas tax coupled with a surplus eliminator won’t get tax reform in Washington where it should go, but it’s moving Idaho down the road.