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Don Davis, Forum News Service, Published February 18 2014

Coalition proposes 5 percent fuel sales tax in Minnesota

ST. PAUL – A proposal to increase Minnesota fuel taxes by the equivalent of 15 cents a gallon is similar to a proposal lawmakers may consider after the 2014 legislative session convenes next week, the two legislative transportation finance chairmen said Tuesday.

The proposal unveiled Tuesday by Move Minnesota, a coalition of 150 organizations, would provide more than $700 million for transportation and transit projects. In addition to the fuel tax, the organization proposes increasing a Twin Cities sales tax.

Transportation finance chairmen Sen. Scott Dibble and Rep. Frank Hornstein, both Minneapolis Democrats, said at a meeting Tuesday that a new funding proposal would be presented during the session, adding that it would be similar to the Move Minnesota plan.

Move Minnesota’s 5 percent sales tax would be placed on wholesale motor fuel sales, which Sen. David Osmek, R-Mound, said would amount to the equivalent of a 15-cent-per-gallon increase if the price of gasoline is $3 a gallon.

Minnesota collects 28.5 cents per gallon of gasoline, a figure Move Minnesota said should not change.

A gas tax is collected per gallon at the pump, while the new tax would be collected as a percentage of the fuel price at the wholesale level, but likely passed on to consumers.

Since the proposed tax would be based on price, more revenue would come to the state if fuel prices rise. Revenue from the per-gallon tax has been holding fairly level as gas mileage improves in newer vehicles.

Move Minnesota also proposed:

  • Increasing a Twin Cities sales tax to 1 percent, with proceeds going to transit projects. Sales in most of the seven metropolitan counties already are taxed at 0.25 percent for transit. The increase would provide $335 million.

  • Giving all money collected from a tax on vehicles that are leased to transportation projects. Transportation already gets half of the funds, but the proposal would dedicate the other $32 million a year to transportation.

  • Diverting $16 million already coming to Minnesota from the federal government to bicycle and walking paths.

    Transportation Commissioner Charlie Zelle told the committee that the state has a $12 billion gap between money needed for transportation and money available in the next 20 years.

    Margaret Donahoe of the Minnesota Transportation Alliance said the proposed tax increase “would really make a dent” in the state’s transportation funding gap.

    Osmek asked the question of the day: “Do we have a bill in our future?”

    Hornstein and Dibble told reporters they do not have their bill ready, but it probably would look a lot like the Move Minnesota proposal.

    “We are going to take a look at them,” Hornstein said of the Move Minnesota provisions. “There are some good concepts here.”

    House Speaker Paul Thissen, D-Minneapolis, told Forum News Service on Friday that he cannot accept a fuel tax increase.

    “We are in discussions and we will see what happens,” Hornstein said.