With potholes, and uneven and buckled surfaces, Wisconsin’s roads are in need of repair. According to a recent study, Wisconsin is in the list of ten states with the worst roads in America.[i] Governor Tony Evers has proposed increasing the gas tax by 8 cents per gallon to raise revenue for transportation projects. As a Wisconsinite, I believe that increasing the gas tax may not be a good solution to fix our state’s crumbling roads.
Wisconsin ranks in the top 20 states for the highest state gas tax, which is currently at 32.9 cents per gallon. However, when states are ranked according to state taxes as percentage of gas price, then Wisconsin ranks in the top 12, with 16 percent.[ii] If Governor Evers’ proposal is approved, state gas tax in Wisconsin would be 40.9 cents per gallon. Currently, only 10 states have state gas tax higher than 40.9 cents per gallon. The proposed tax hike would create greater financial burden for Wisconsinites.
A transaction to purchase gas may be marked by information asymmetry. When purchasing any good, the amount of sales tax is usually very clearly indicated on the receipt. The consumer knows exactly what the price of a product is and how much sales tax is being charged. However, when a consumer buys gas at a station, the amount of gas tax – federal and state – may not be posted at the pump.[iii] The seller may know the pricing and tax information, but the consumer may only see the total price per gallon, taxes included, without the actual breakdown. State gas tax, which is generally not posted for the consumer to see at the time of transaction, should not be raised.
Usually, a change in the price of gas does not significantly change how much gas is being purchased, due to the lack of availability of substitutes for this commodity. However, technological advancements have made automobiles fuel efficient. If state gas tax is increased, then over time, people would shift towards buying more fuel efficient and hybrid vehicles that require less gas for the same number of miles. This means that a state gas tax increase may not lead to a very reliable and stable source of funding for transportation projects.
Finally, people like to keep more of their hard-earned money, and not have to pay more taxes on top of the ones they already pay. The same is true with regard to the proposal to increase the state gas tax. A recent Marquette Law Poll revealed that majority of Wisconsinites oppose raising the gas tax.[iv]
Wisconsin’s roads need to be fixed. Gas tax is one of several options to fund transportation projects. But, I do not believe it is a good option. The executive branch and the legislature in Wisconsin must work together to find fair and feasible solution to our state’s transportation issues, without raising taxes.