Fund roads with spending reductions, not tax increases

February 27, 2014

Gov. Jack Markell has suggested raising the motor fuel tax 10 cents a gallon to raise about $50 million to pay for the increase in road funds. He is being met with resistance from both Democrats and Republicans to this proposal, and for a good reason.

Based on national fuel consumption trends tax revenue generated from the motor fuel tax, last raised in 1995, has increased close to 50 percent since 1995 as the population increased and people drove more miles each year.  From this past fiscal year the motor fuel tax  raised about $112 million for Delaware compared to $115 million actually spent on road construction.

The General Assembly allowed the trust fund to be used for other purposes to the tune of $82 million last year, with a reduction to $43 million for this year.

In the last budget $46 million in road construction projects were postponed. This year’s proposed budget would catch up on those delays.

The main reason for the high cost of building roads and bridges and schools, not mentioned by most pro-tax increase proponents, is Delaware's prevailing wage. Contractors working on state projects such as schools and roads must pay their employees prevailing wage. The state surveys the contracting companies to calculate the wage to be paid for different jobs related to these construction projects.

A similar survey is already being done for the U.S. Bureau of Labor Statistics which has five times as many responses and doesn’t over-represent union shops. Using the national survey instead of Delaware's to set wages would leave workers with fair wages but would also save taxpayers up to $90 million a year on road construction projects and up to $45 million on school construction projects.

Governor Markell should consider reforming Delaware's prevailing wage law and align it with the national survey to reduce transportation expenses rather than seeking an increase in the gas tax. We question the wisdom of permanently raising taxes to make up for a temporary problem.

Dave T. Stevenson
director, Center for Energy Competitiveness
Caesar Rodney Institute


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