Beginning March 1, motorists in Iowa will pay higher state taxes at the gas pump for the first time in 26 years. Legislation raising Iowa's tax on gasoline and diesel fuel by 10 cents a gallon was signed into law February 25 by Governor Terry Branstad.
Branstad says he signed the bill because Iowa roads and bridges need repair. Revenue gained from the additional fuel tax will be used to fill a $215 million per year shortfall in funding by the state to fix roads and bridges. The money is needed to meet the most critical needs on Iowa's 114,000 mile road system, as many aging roads and bridges need repair or replacing, according to state Department of Transportation studies.
New law includes increased fees for permits for certain trucks
The new law also includes increases in fees charged for permits needed to operate oversized and overweight trucks.
Iowa now spends about $2 billion annually on its road system. But a recent industry report cites federal data showing 27% of Iowa's major urban roads and highways have pavement in poor condition, while 13% of rural roads are in poor condition. Also, more than 25% of Iowa's bridges are rated as structurally deficient or functionally obsolete.
New gas tax will likely cost average taxpayer $60 more per year
For a person who drives 15,000 miles a year in a vehicle getting 25 miles per gallon, the higher fuel tax will cost an additional $60 annually, or an average of $5 a month, says Dave Swenson, an economics professor at ISU. If you drive 30,000 miles per year but only get 15 miles per gallon, the cost is $200 per year.
Senator Tim Kapucian, a farmer from Keystone and a Republican, says the gas tax bill wasn't perfect but it was bipartisan and reflected an agreement between the House and Senate leaders. He says there's no question about the need to improve Iowa's road system. He says state officials have studied every possible funding method. "This was not an easy vote. It's been a long process," he adds.
Iowa Farm Bureau lobbied the Legislature hard to get this bill passed. Last week 200 Farm Bureau members flooded the state Capitol to encourage lawmakers to vote in favor of the fuel tax increase. Farm Bureau president Craig Hill says better roads are crucial to Iowa's economy and fuel taxes offered the best solution. An estimated 20% of Iowa's fuel taxes are paid by out-of-state motorists.
Iowa can't just keep kicking this can down the road
Senator Todd Bowman, a Democrat from Maquoketa, is chair of the Iowa Senate Transportation Committee. He argued in favor of the fuel tax hike in a floor speech in the Senate this week. He said good roads and bridges are key to Iowa's economic growth and prosperity. Business leaders are warning that bad roads are one of Iowa's most serious economic development weaknesses. "We can't continue to kick this can down the road," said Bowman. "We can't keep putting this off year-after-year."
Lawmakers who voted against the bill complained it was being considered without proper scrutiny. Representative Chip Baltimore agreed. "I refuse to legitimize either the bill or the process with a vote," said the Republican from Boone, the only representative who abstained from voting. Representative Steven Holt, a Republican from Denison, said the legislation does not respect Iowa taxpayers. "Government continues to spend more and more taxpayer money as if their pockets are bottomless pits."
The legislation was opposed by Iowans for Tax Relief and Americans for Prosperity, a conservative advocacy group, as well as truckstop operators and convenience store owners who worry that gasoline and diesel fuel retailers in Iowa located along state borders will lose business to fuel stations in neighboring states.
Iowa Corn Growers Association supports fuel tax increase
The Iowa Corn Growers Association, Iowa Soybean Association and Iowa Biodiesel Board all favor the fuel tax increase. They say this new law will improve roads and bridges and spur growth in biodiesel use in Iowa.
"Transportation infrastructure is essential for corn growers and Iowa's economy," ICGA said in a press release. "Because Iowa's roads and bridges are in desperate need of repair, Gov. Branstad signed SF 257 into law. This bill will provide necessary funding for the growing maintenance demands on Iowa's infrastructure. The new law raises the state fuel tax 10 cents a gallon, directing more than $200 million into Iowa's Road Use Tax Fund, a constitutionally protected mechanism to support transportation infrastructure projects."
"Farmers and agribusiness rely on Iowa roads and bridges, and the longevity of our infrastructure relies on us," says Jerry Mohr, a farmer from Eldridge who is ICGA president. "We thank Governor Branstad and the Iowa Legislature for passing this important bill for Iowa's future." The bill passed both the Iowa House and the Iowa Senate on February 24 and Branstad signed it into law February 25. The new law raises the current state fuel tax by 10 cents per gallon, effective March 1, while maintaining a differential incentive for ethanol and adding an incentive for biodiesel blends of fuel.
Iowa Soybean Association lauds action on state fuel tax
The Iowa Soybean Association is also pleased the Legislature approved and Branstad signed into law the 10-cent increase in state fuel tax. ISA says this is "a move that will improve Iowa's aging roads and bridges and boost the use of renewable fuels."
The bill was passed by a vote of 28 to 21 in the Senate, and a vote of 53 to 46 in the House. Then it went to the governor's desk. Branstad signed it into law February 25. Included is a provision providing a 3-cent-per-gallon tax exemption for diesel blended with at least 11% biodiesel.
ISA president Tom Oswald praised lawmakers for supporting what he calls "this timely and necessary legislation. Iowa's infrastructure, including critical farm-to-market roads and bridges, continues to deteriorate, jeopardizing personal safety and the ability to conduct business. This new law moves us from focusing on the shortcomings of our infrastructure to going to work to improve it."
State can now go to work and repair deteriorating roads, bridges
Grant Kimberly, ISA market development director and executive director of the Iowa Biodiesel Board, thanked the Legislature and Branstad for acting boldly on behalf of biodiesel, an advanced biofuel derived from Iowa-grown soybeans. "The provision for biodiesel in this new law is smart policy that positively impacts our environment and economy and the competitiveness of Iowa soybean farmers," he says.
ISA president-elect Wayne Fredericks says the Legislature passing the bill and the governor signing it into law are an advance in sustainability and environmental quality. "In one move, the Iowa Legislature voted in favor of better roads and bridges and reaffirmed its support of renewable fuels. Every gallon of biodiesel we use at home is one less that we need to import, benefiting local jobs, farms, families and communities."
Iowa is the nation's leader in renewable fuels production and is home to 12 biodiesel facilities with the capacity to produce nearly 315 million gallons annually. The production of this renewable fuel supported the employment of 4,300 working Iowans and contributed more than $470 million to the state's gross domestic product.