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Flat gasoline tax income may hurt state's finances

HARRISBURG — The transportation funding debate is headed for a showdown over how the state's massive needs should be funded — by adding tolls to Interstate 80 and increasing them on the Pennsylvania Turnpike, or by leasing the turnpike, which also would increase its tolls.

The tolling plans have completely taken off the table the idea of any new gas taxes.

Just 16 months ago, an 11.5-cents-a-gallon gas tax was how Gov. Ed Rendell's transportation funding commission proposed generating much of the $1.7 billion a year it said was needed to maintain roads, fix bridges and underwrite mass transit.

But a bleak future for gasoline tax revenues was a central part of the argument that House Majority Whip Keith McCall, D-Carbon, has been making in defense of last summer's I-80 tolling law. McCall said it was not as if even a 2-cents-a-gallon gas tax had a prayer of making it through the Legislature.

He thinks tolls will be a more reliable stream of future revenues as gas prices soar, sales of hybrids account for more of the total fleet and people drive fewer miles.

In December, Congress ordered a 40 percent increase in automobile fuel economy, the first change in 32 years, another reason to suspect a per-gallon gasoline tax will be reaping diminishing returns, particularly in a population stagnant state such as Pennsylvania.

State tax revenues increased by nearly 50 percent over the past decade, but the liquid fuels tax used to build and maintain roads saw growth of barely half that rate.

Taxable gallons, the state Revenue Department's measure of gasoline sales, have been falling, down from 5.2 billion in 2004-05 to just about 5 billion in 2006-07.

The Pennsylvania Department of Transportation's system of 59 automatic counters registered a decrease in traffic of 0.13 percent in 2007. Preliminary national estimates from the Federal Highway Administration show traffic was down 0.4 percent last year, and down by nearly 4 percent in December compared to December 2006.

"With high gas prices, it's almost natural that people are starting to make decisions about how to cope with that," said PennDOT spokesman Rich Kirkpatrick.

Pennsylvanians currently pay state taxes of 32.3 cents a gallon for gasoline — a liquid fuels tax of 12 cents, an oil company franchise tax that is indexed to the wholesale price, and a storage tank fee of 1.1 cents. It is the nation's fourth-largest such tax, according to the Tax Foundation.

McCall said he is convinced that tolls are the wave of the future, and not just in Pennsylvania.

"I won't be here when it all happens, I'm sure, but I think the trend will be to move to tolls and away from gas taxes," McCall predicted.

Pennsylvania's most recent gasoline tax increase was in 1997, when a 3.5-cent levy pushed by Gov. Tom Ridge squeaked through the Legislature.

In Virginia, a nickel-a-gallon increase, phased in over five years, passed the state Senate last month but stalled in the House. About that time, the Minnesota Legislature overrode a gubernatorial veto to impose an 8.5-cent, phased-in increase, along with a $25 tax credit to lessen the impact on lower-income people.

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