On Thursday, May 4, the Assembly Republicans held a press conference to announce a transportation budget proposal. The proposal, authored by Rep. Dale Kooyenga (R-Brookfield) aims to reduce the level of bonding in Gov. Scott Walker’s proposed transportation budget by $300 million and to increase tax revenues to the transportation fund. Additionally, the proposal aims to move Wisconsin to a flat income tax by 2030.
Key elements of the proposal are:
- Lower the state’s minimum markup requirement on motor vehicle fuel sales from 9.18 percent to 3 percent. Specifically, the wholesaler markup on motor vehicle fuel sales would be eliminated and the retailer markup would be reduced to 3 percent.
- Apply Wisconsin’s sales tax to motor vehicle fuel sales with the revenues being deposited directly to the transportation fund.
- Lower Wisconsin’s motor vehicle fuel excise tax rate by 4.8 cents per gallon, from 30.9 cents per gallon to 26.1 cents per gallon, effective October 1, 2017.
- Eliminate prevailing wage requirements on state construction projects.
- Eliminate 180 Department of Transportation engineer positions.
- Eliminate and/or lower certain tax reforms and credits to implement, over time, a flat 3.95 percent income tax.
- Eliminate the state property tax.
The Wisconsin Legislative Fiscal Bureau estimates the next tax rate increase would be 7.2 cents per gallon for gasoline and 10.0 cents per gallon for diesel fuel (accounting for both the extension of the sales tax and the reduction in the excise tax), with no estimated state fiscal effect related to reducing minimum markup. The estimates are assumed under a gasoline price of $2.40/gallon and diesel price of $2.95/gallon.
In response to the plan, Walker reiterated his opposition to raising taxes on motor vehicle fuel, and said his administration needs more time to review other parts of the plan, including the proposal to move toward a flat income tax. The governor said he cannot support the transportation plan, saying “I oppose a gas tax increase, no matter what you call it.”
Senate Majority Leader Scott Fitzgerald’s (R-Juneau) initial reaction was that the proposal “contains a number of good ideas that are worth a closer look” but stated his caucus is working on an alternative plan. On Wednesday, May 10, Fitzgerald said he did not “see any momentum for [Rep. Kooyenga’s] plan being adopted and being part of this budget.”
Joint Finance Committee co-chairs also mentioned this week the possibility of removing transportation from the state budget and taking the issue up in a separate bill. Co-chair Sen. Alberta Darling (R-River Hills) said the removal could give legislators more options for solving the state’s transportation funding shortfall. However, both Walker and Fitzgerald said they would not support addressing transportation separately from the normal budget process.