How I wish I could be in Aberdeen to join Ken Santema at the Legislative crackerbarrels! My Libertarian blogospheric colleague is providing excellent coverage of Legislative issues. Yesterday he got hold of a useful handout from Senator David Novstrup (R-3/Aberdeen) comparing the costs of the competing road-tax-and-fix bills proposed by Governor Dennis Daugaard and by the interim Highway Needs and Financing Committee:

Comparison of Daugaard and Interim Committee Road Tax Proposals, distributed by Sen. Al Novstrup, published by Kan Santema, SoDakLIberty, 2015.01.24

Click to embiggen—Comparison of Daugaard and Interim Committee Road Tax Proposals, distributed by Sen. Al Novstrup, published by Kan Santema, SoDakLIberty, 2015.01.24

The immediate bottom line shows the Governor's proposal imposes half the tax burden of the committee's plan, $51 million versus $101 million, largely by leaving out the 3% wholesale fuel tax.

But remember, that's just in the first year. The above comparison does not note the increasing revenue that will come on the motor fuel tax line from Daugaard's proposed ongoing annual two-cent increase, which far outpaces the increase proposed by the interim committee. The 3% wholesale tax in the committee proposal may provide more revenue, if gasoline prices do what we'd expect and rise over time. But remember: after the 1986 oil price crash, gasoline prices remained remarkably flat through the 1990s. The wholesale tax doesn't guarantee more revenue; Daugaard's plan does.

Of course, as of this weekend, we still don't have the Governor's exact plan. The interim committee's plan was the first bill filed for the Senate; the Governor's plan has not yet been filed as a formal bill.

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Udpate 12:50 CST: My original post ignored a 3% wholesale tax imposed by Senate Bill 1. I have refigured my spreadsheet and adjusted the text here to include that new tax in this explanation.

Wait a minute: did I call Governor Daugaard cheap? His road plan would raise you gasoline tax just as much as the Legislative plan he's rejecting.

We don't have the Governor's formal bill yet, just the points he laid out in his State of the State Address yesterday. The Governor proposes raising the tax on motor fuel two cents per gallon each year, starting this July. He gave no sunset date. He says that hike would raise $13.75 million in the first year.

Governor Daugaard justifies that annual increase by pointing out the failure of our motor fuel tax to keep up with inflation:

The legislature implemented the current $.22 motor fuel tax in 1999. That was 16 years ago, when I was in the State Senate, and Bill Janklow was governor. Gasoline was around $1 per gallon, so the motor fuel tax at the time represented 22% of the total price per gallon. That per-gallon fee of $.22 was fixed in statute and has been the same for the last 16 years. If the legislature had indexed the gas tax to inflation for construction costs, the fuel tax would be $.45 today – more than double [Governor Dennis Daugaard, State of the State Address, as transcribed by that Sioux Falls paper, 2015.01.13].

Two cents more each year won't break 45 cents per gallon until 2027 (Fiscal Year 2028).

Senate Bill 1 raises the motor fuel tax in smaller increments, from 22 cents per gallon now to 28.16 cents per gallon in 2025. SB 1 doesn't start boosting the tax until next year. SB 1 specifies no increases after that.

To keep up with inflation, SB 1 creates a new 3% tax on the wholesale price of motor fuel. That tax starts at 7.5 cents per gallon, which is then established as an ongoing minimum, just in case oil prices miraculously stay cheaper.

You can check out my spreadsheet comparing the Governor's motor fuel tax proposal with Senate Bill 1. I assume constant gasoline demand extrapolated from the Governor's first-year revenue estimate. For the wholesale fuel tax, I assume 3% inflation from this year's levy and further assume that the cost will be passed on fully to consumers at the pump. Your mileage may vary. Here's the fiscal impact by July 1, 2026:

  1. The Daugaard plan would have South Dakotans paying 5.8 cents more per gallon than SB 1.
  2. The SB 1 motor fuel taxes raise more revenue than the Daugaard motor fuel tax for the first five years.
  3. In Fiscal Year 2021, Daugaard's fuel tax raises more revenue than SB 1's motor fuel taxes.
  4. In FY2026, Daugaard's two-cent-per-gallon increases will bring in almost $40 million more than SB 1's smaller retail per-gallon hike and 3% wholesale tax.
  5. A household driving 20,000 miles a year and averaging 30 miles per gallon would pay around $293 in annual fuel tax under the Daugaard plan, versus around $255 under SB 1 and $147 under the current 22-cent tax.
  6. Over the next eleven years, the Daugaard fuel tax raises $907.5 million in additional revenue; the SB 1 fuel tax, $884.6 million. Translation: The Daugaard motor fuel tax takes 2.6% more money out of your pocket at the pump than Senate Bill 1.

The plan Governor Daugaard laid out yesterday raises the vehicle excise tax from 3% to 4%, just like SB 1. Daugaard raises vehicle registration fees 10%, just like SB 1. We'll see where the Daugaard plans gets its savings over SB 1 in its final draft when it hits the hopper.

But as it stands right now, over the next eleven years, Governor Daugaard's plan would hit you as hard as Senate Bill 1 when you buy, register, and gas up your car.

Related Reading:

  1. John Tsitrian calls Governor Daugaard for reneging on his 2010 no-new-taxes pledge after ignoring obvious shortfalls in road funding throughout his first term.
  2. Bob Mercer lists the new revenue Governor Daugaard would get from his various tax and fee increases in the first year of the plan.
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Senator John Thune is promising sanity in Washington. Not only does he say "We're not going to shut the government down" in the GOP's ongoing attacks on President Obama, but he offers the home folks (i.e., Dennis Daugaard) some cover by expressing Republican openness to raising taxes to fix roads:

In an interview on "Fox News Sunday," Thune said that while he is opposed to increasing the gas tax, lawmakers will need to "keep all options" available when they return to Washington this week.

"I don't favor increasing any tax," Thune said. "But I think we have to look at all options."

..."I don't think we take anything off the table at this point," said Thune, who will chair the Senate Commerce, Transportation and Energy Committee. "Those discussions continue... It is important that we fund infrastructure" [Kevin Cirilli, "GOP Senator Leaves Wiggle Room on Gas Tax," The Hill, 2015.01.04].

Senator Thune can't quite break the chains of GOP-Grover Norquist absolutism. But for sloganeering Republicans, the acknowledgment that one might have to actually raise revenues to pay for vital public goods is a step in the right direction. Now if we can get Senator Thune to talk like that during the 2016 campaign, voters might actually get some healthy policy discussion.

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Pat Powers keeps using the phrase "war on energy," as in, "the Obama Administration[']s EPA continues to prosecute their war on energy production."

Hey, Pat, buy gas lately? I saw $2.19 per gallon yesterday. If these gas prices are a result of a war on energy, please, keep warring!

Oh, guess what: These gas prices are resulting, at least in part from the very earth-friendly Obama policies that Powers irrationally hates. Remember those evil fuel efficiency standards President Obama approved in August 2012? Those standards have helped decrease gasoline demand, contributing to the surplus that's driving oil prices down below the business case threshold for Keystone XL. Even if SUV sales surge (it's already happening, because Americans live in the now... and perhaps because gas nozzles are so phallic?), the President's fuel efficiency standards will conserve energy and temper any price recovery:

...the fuel economy standards will help hold down U.S. gasoline consumption, even if buyers swing back to bigger vehicles. As the standards have toughened, and will get even tighter the next few years, automakers have been making even their lowest-mileage vehicles more efficient.

Since 2010, light trucks — like SUVs and pickups — have already earned an overall 5 percent improvement in gas mileage and by 2025 are expected to have boosted their efficiency by about half.

The mandates are eventually expected to eliminate the need for 3 million barrels of oil per day [Steve Everly, "Cheap Gas Attracts Thirstier Vehicles, But Tougher Fuel Economy Standards Will Make Them Guzzle Less," Kansas City Star, 2014.12.13].

A war on energy would be a war intended to destroy energy ("Impossible!" cry the attentive physicists in the audience), or at least to destroy our sources of energy. If anyone seems hell-bent on waging war on energy, it would seem to be the short-term Republican corporate mindset that advocates burning all the energy we can as fast as we can, leaving no energy—or at least no cheap, easy energy—for our children and grandchildren.

The Obama Adminstration appears to be waging the exact opposite of a war on energy. The Obama Administration is adopting conservation policies that ensure more energy will be around for future generations to use. The Obama Administration is waging a war for energy for future generations against the rapaciousness of a greedy present.

Related reading: Ben Casselman of FiveThirtyEight.com says we know nothing about the future of oil prices.

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The GOP spin machine is trying really hard to scare Republicans away from investing $100 million in South Dakota roads by calling "the single largest tax increase in state history." Pat Powers tries to lower expectations and deter support by claiming the proposal from the interim Highway Needs and Financing Committee is dead on arrival.

Powers had better get in line with his corporate overlords, who are lining up behind road investment. For the past year, a variety of industry lobbying groups have been building a "Roads Are Vital" campaign to make taxes sound fun. Who's on the team supporting a ten-cent gasoline tax hike? The Chamber of Commerce, the general contractors, the truckers association, the cement and asphalt groups (yes, there is a Dakota Asphalt Pavement Association—they initiate new members by tarring and feathering), county commissioners, co-ops, Big Ag, engineers, AAA, the auto-dealers....

The Roads Are Vital Coalition is out tweeting and marketing its pitch, saying, among other things, that the current dip in gasoline prices presents the perfect opportunity to raise the gasoline tax. And while they don't have Governor Daugaard full-throatedly singing their song, they don't have him killing the roads proposal, which he could do with a word if he wanted.

Dead on arrival? I don't think so. The Roads Are Vital Coalition poses a powerful, big money threat to Republicans' commitment to their campaign-trail slogans. Add to that pressure the glaring reality of our crumbling roads and bridges, and we just might see the 2015 Legislature fill some potholes.

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Who needs highways when I've got a horse!

Who needs highways when I've got a horse!

What?! Kristi Noem still hasn't fixed the Highway Trust Fund? What do we pay our Congresswoman for?

While Kristi's colleagues fiddle with short-term stopgaps to fill our potholes, a new study funded by the Soybean Transportation Coalition suggests that a long-term fix may rely on some tax judo: ease drivers into a long-term gasoline-tax increase with an immediate tax break.

The federal gasoline tax has hung at 18.4 cents per gallon since 1993. Back then, that would have been about an 18% tax on gasoline. Today, 18.4 cents per $3.75 gallon is about 5%.

The soybean lobby suggests knocking a penny off the gasoline tax as a political palliative but then indexing the gasoline tax to inflation to keep up with the cost of concrete, steel, and everything else we need to build and maintain roads. Their study, conducted by the Indiana University School of Public and Environmental Affairs, says that inflation-indexing would make up for the lost revenue of the penny drop within four or five years. The study finds that South Dakota would take a $6.7-million hit in the first year, but we'd recoup the loss by 2019. By 2025, we'd accumulate $119 million in extra revenue ($25.9 million in 2025 alone) while paying 3.4 cents more per gallon.

Governor Daugaard will tell you that raising more money through the gasoline tax by indexing it to inflation is not a new tax or a tax increase; it's just restoring the purchasing power of the gas tax. Alas, the cut-then-index plan would extend the road budget bind for another couple years before road-building states would see any progress. Is additional fiscal pain (and rump pain, as you bounce over those potholes) really the only way we can coax Kristi and Congress into fixing the Highway Trust Fund?

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District 4 Senate candidate Steve Street says his opponent, Senator Tim Begalka, posted the following nonsense on Facebook Tuesday:

"Just as I predicted a couple months ago when gas was at its highest, Obama has seen to it that gas prices keep falling before election day. If that America-hater somehow gets re-elected, I GUARANTEE [we] will see the highest gas and electricity prices ever. Our security, productivity, wealth, and economy will be crippled [Sen. Tim Begalka, Facebook post, quoted by Rep. Steve Street, Facebook post, October 30, 2012].

Oh, Tim, where to start?

First of all, Begalka is correct that gasoline prices are down:

Gasoline Prices, Canada and U.S., October 2012

Hey, what's that blue line? Oh, it's Canada's gasoline prices, which have dropped just like U.S. gasoline prices. I'm sure Tim will explain to us that parallel decreases in Canada's gas prices just show that President Obama is controlling our northerly neighbors' gasoline market as well.

Gasoline prices did drop a bit more Friday because of direct action by the President: he issued a Jones Act waiver to allow foreign tankers to haul fuel from domestic ports to the East Coast to mitigate the shortages caused by Hurricane Sandy. Gee, Tim, that doesn't sound like America-hating political manipulation; that sounds like responsible crisis management.

But on the whole, Begalka is just peddling the same economic lie that his fellow Republicans U.S. Senator John Thune and District 16 Senator Dan Lederman have trotted out at various points this year that the President controls gasoline prices. Mitt Romney himself punctured that lie in March (oh, the irony, using Mitt Romney to fact-check Republican double-talk).

Tim fails to recognize that over the last 20 years, according to Energy Information Administration data, October has brought an average decline in gasoline prices of 2.7%. The 8.1% decline on the Gas Buddy chart is larger than average, but not greater than October declines seen in 2001, 2006, and 2008. Demand is down in October, and gasoline producers are shifting to the cheaper winter blend of gasoline.

The fluctuations in gasoline prices result from much broader economic forces than the machinations of the man in the White House. But suppose President Obama could somehow change the numbers on the BP signs. If you were the CEO of BP, would you fall for it? If gasoline prices could decide an election, wouldn't the CEO of BP call up his pals at Exxon, Shell, etc. and say, "Hey, fellas! Jack 'em up, and we can get Romney in to let us drill everywhere!"? Wouldn't you buck the market for just a month to get four years of blissful crony-capitalism?

On top of his economic cluelessness, Begalka bares his bumpkin teeth by declaring the President an "America-hater." He's not quite putting up a new sign for the Circle H Motel in Lake Andes, but he's playing to that nasty, fearful, and wholly counterfactual sentiment that Barack Hussein Obama can't love America. We can disagree on the wisdom of various policies, but Tim Begalka has no more power than I to see into any man's soul. We can only look at the words and actions of others. At every turn, President Barack Obama's words and actions make clear that he loves and believes in America as much as Tim or I or anyone else.

District 4, you deserve better. Don't pick a state senator who panders to the unthinking and hateful. Lower Tim Begalka's gasoline bill by sparing him any more drives to Pierre. Maybe taking him out of the political pressure cooker will help him realize that accusing your opponents of hating America is a cheap and wrong-headed political tactic.

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...Lake Herman Toodles Along Online...

Jonathan Ellis from that Sioux Falls newspaper writes a summary of South Dakota's open government practices for the Sunlight Foundation. He says South Dakota has a culture of treating government records as the property of the government, not of the people. Obviously, we need to keep teaching our leaders that the government is us!

Ellis will have the chance to discuss his column with his colleagues on the state's new open government task force today. Among specific issues for discussion will be the repeated secret rule-making that the Governor has allowed to cover the illegal activity of gas station owners and the state itself in not following its own prohibition of the sale of low-quality gasoline.

Meanwhile, one sewer district with no sewer is doing all it can to keep government open. The Lake Herman Sanitary District held its first teleconference Monday. Charlie Stoneback and I agreed to ask Banner Associates to update its proposal for a new sewer study to include the cost of adding residential areas adjoining the district. Our meeting minutes are all online.

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