The Gas Tax and the Governor’s Race

You won’t find any specific mentions of New Mexico’s gasoline tax on the websites of the two leading candidates for governor. Steve Pearce is silent on the issue. Michelle Lujan Grisham cryptically promises to “work with the legislature to secure financing for [infrastructure] investments and work with unions, industry, and other stakeholders to put people back to work at rebuilding New Mexico.” (Decide for yourself what that means.)

But there’s no question that in the Land of Enchantment, nearly every Democrat lawmaker, and more than a few Republican solons, want you to pay more at the pump. After all, there’s plenty of room for growth. As the Tax Foundation’s map above shows, the state has one of the lowest total gasoline-tax burdens in the country. (In addition to the per-gallon charge, an “inventory tax” is imposed on distributors and wholesalers and a “loading fee” is assessed to pipelines and refineries.) Even “worse,” no local government has imposed the optional tax permitted by statute.

Earlier this year, HB 228 attempted to hike the core levy from 17¢ to 27¢ — and for good measure, increase the diesel tax from 21¢ to 31¢. It failed, fortunately, but legislation like it is sure to return in 2019, no matter who moves into the governor’s mansion. In New Mexico, as well as other states and Washington, D.C., “infrastructure is crumbling!” wailing is common. It’s mostly hogwash, and particularly so in New Mexico. The Reason Foundation’s latest look at state highways ranked the Land of Enchantment 24th, with strong marks for the “condition of major rural highways,” “pavement condition of the urban Interstate system,” and the portion of bridges deemed “deficient.” The southeast corner of the state needs to be addressed, due to the Permian Basin boom. But help is on the way, and with increased revenue from the severance tax, additional repairs and upgrades are easily affordable.

Other ways to dodge a gasoline-tax hike include:

● Stop squandering money on “infrastructure” that serves no purpose. “Spaceport America,” the New Mexico Rail Runner Express, Albuquerque Rapid Transit — all need to be scrapped. Yesterday. And a commuter-rail line from Las Cruces to El Paso must not be built.

Repeal the state’s prevailing-wage mandate. Artificially inflated (translation: union) compensation for employees on public-works projects means less repaving, pothole-filling, and bridge repairs. Many states have never had, or have chosen to repeal, their prevailing-wage laws.

● Divert all of the dollars from the excise tax on motor-vehicle sales to spending on roads and highways. Currently, the general fund gobbles up the vast majority of the levy’s revenue.

● Cut rape tape. Whether it’s procurement reform or slashing a top-heavy bureaucracy, the New Mexico Department of Transportation is overdue for some substantial scrutiny.

Residents and travelers alike benefit from the Land of Enchantment’s relatively cheap gas — a perk made possible, in part, by light taxation. It’s one of the very few public policies that the state gets right. Let’s hope New Mexico’s next governor doesn’t screw that up.

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2 Replies to “The Gas Tax and the Governor’s Race”

  1. Although I’m not a particular fan of higher taxes, I do think that there is an argument for “counter-cyclical” gasoline taxes in New Mexico, e.g.: In periods of high oil prices, gas taxes would be lowered, while in periods of low oil prices, gas taxes would be raised.

    This would have two benefits: In periods of high oil prices, it would help reduce the impact of higher gas prices on consumers, while in periods of low oil prices it help stabilize state revenues.

    1. That reform would be politically popular, but from a good-budgeting perspective, problematic. The gasoline tax is the plurality contributor to the state road fund, which covers maintenance, repair, debt service, and NMDOT employee compensation. Since demand for gasoline is inelastic, the tax provides a reliable stream of revenue for the people in charge of maintaining roads/highways/bridges. Cutting and raising it, depending on the retail price of gasoline, would throw quite a sizable wrench into the works.

      The best answer to the never-ending fight about gasoline taxes is to shift to a VMT tax. How much you use the roads/highways/bridges, adjusted for how heavy your vehicle is. That makes the government properly agnostic on fuel choices — gasoline, diesel, natural gas, electricity, hydrogen, steam (if you’re Jay Leno) — and makes the tax more visible. (And thus, less likely to be hiked.)

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