Gas tax proposal with a clean infrastructure fund passes first committee

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A proposal to raise the state’s gasoline tax passed its first committee hearing Friday. The proposal, which would raise the gas tax by 10 cents next year, passed the House Taxation and Revenue Committee on an 8-5 vote along party lines.

Democratic Rep. Matthew McQueen, sponsor of HB 173, said the bill would help improve New Mexico’s road infrastructure and would also create a clean infrastructure fund. New Mexico hasn’t raised its gas tax since 1993.

“We happen to have the fourth lowest gas tax in the country,” McQueen said. “The problem with the gas tax is that they are typically regressive. It hits lower income people harder. This bill addresses both those issues.”

The bill would create a new gasoline and special fuel surtax of 10 cents per gallon, which would take effect in Fiscal Year 2021. The surtax would then increase by 5 cents per gallon annually until 2026. At that point, the state Taxation and Revenue Department would calculate a set rate for the gas tax.

The bill would divide up the proceeds of the tax between the road fund, a newly created rebate fund for low and moderate income families, and a new clean infrastructure fund.

McQueen said the clean infrastructure fund would “allow the state to prepare for the energy transition that we’re already in the midst of, to help reduce greenhouse gases, to further electrify the state’s fleet of vehicles, to make sure we have charging stations, so people feel comfortable purchasing electric vehicles and be able to get around the state.”

Speaker of the House Brian Egolf seemed uncomfortable with the idea of raising the gasoline tax.

“We have a long history as Democrats in the House of keeping the gas tax at 10 cents in deference to lower income consumers. That’s been a hallmark position of the caucus for many, many years,” Egolf said. “Unless we’re certain that the rebate piece is properly calculated, I’d be nervous about having a significant impact on the budgets of the lowest income New Mexicans.”

Egolf suggested the bill be sent to the House Appropriations and Finance Committee to have the rebate calculation tweaked.

Other Democrats on the committee, including Rep. Micaela Lara Cadena, D-Mesilla, expressed support for the rebate program included in the bill.

“I do think gas taxes should go into a road fund,” Cadena said. “I also believe that the very pointed and focused effort to address the regressive nature [of the tax] in the low-income tax rebate is incredible.”

All five of the committee’s Republicans voted against the bill.

Rep. Jason Harper, R-Rio Rancho, who said he hates taxes and called them a “necessary evil,” said he would support a modest gas tax increase. But Harper balked at the 10 cent increase.

“I’m concerned that we’re going from the third or fourth lowest tax to the fourth or fifth highest in the U.S.,” he said. “That’s a big change.”

Rep. Jim Strickler, R-Farmington, echoed Harper’s concerns. Strickler said residents in his rural district tend to pay 25 percent more on gas than urban residents.

“We need to look at the big picture. This is a large increase,” he said. He added that the Legislature raised taxes last year.

“In the midst of a budget surplus, it’s kind of counter-intuitive,” he said.

The bill is headed to the House Appropriations and Finance Committee next.