Massachusetts House leaders on Wednesday unveiled a package of fee and tax hikes designed to seed the state’s transit systems with new money, proposing to increase the state’s gas tax by 5 cents per gallon, hike fees on Uber and Lyft rides, and raise taxes on businesses.
The long-awaited legislation would raise $522 million to $612 million more a year for transportation needs, according to House officials, in part by also eliminating a sales tax exemption that rental car companies currently enjoy when buying their fleets.
The bill, which is expected to go to the House floor next week, will force representatives to vote on a tax hike in an election year. But House Speaker Robert A. DeLeo framed the legislation in urgent terms, pointing to the region’s growing congestion, crumbling roads and rusting bridges, and a series of failures at the Massachusetts Bay Transportation Authority.
He also called the bill a way to “jump start” spending ahead of an expected 2022 ballot question that, if approved by voters, would add a surtax on household income over $1 million to help fund transportation and education.
“This is almost like a bridge, if you will, until we get to that,” the Winthrop Democrat said Wednesday. He said that raising taxes “can’t wait any longer. Our residents, our communities, and our economy are dependent on an immediate source of revenue."
The bill drew lukewarm, cautious support from advocates and business leaders, some of whom suggested they hope the total revenue grows as it moves through the legislative process. James Aloisi, a former state transportation secretary, called it “underwhelming” and said it “doesn’t raise anything close to what we needed."
“The amount of money does not satisfy the needs in total,” said James Rooney, president of the Greater Boston Chamber of Commerce, which backs increasing the gas tax by 15 cents per gallon over three years. But he said he recognized that raising taxes would be unpopular, especially in an election year.
“Anyone can make numbers add up," he said. "When you incorporate political feasibility into the equation, it gets a lot harder.”
The House bill would pledge $27 million more a year to the MBTA from the fee hike on Uber and Lyft rides, in addition to a $160 million annual transfer from the state’s transportation fund that’s already in statute but has often been left underfunded.
Taken together, that $187 million pot marks a $60 million increase from the $127 million the Legislature has sent to the T in recent years.
But it’s lower than the $200 million Governor Charlie Baker asked for in his latest budget proposal. And even with that level of financial help, the MBTA recently said it is struggling to balance its expected $2.3 billion-plus budget.
The bill would also set aside a dedicated $27 million revenue stream for the state’s 15 regional transit authorities and $10 million to help rural communities.
But the 19-page bill is built largely on four parts, with the goal of pouring most of the money into the state transportation fund. It would raise the state’s gas tax by 5 cents to 29 cents a gallon, which officials say would generate $150 million to $175 million more each year. It also would add another 4 cents per gallon on top of that for diesel purchases.
The changes would mark the first increase in the gas tax since 2013, when it was raised by 3 cents. At the time, officials tied the tax to inflation, but that provision was reversed by voters in 2014.
The state fees on ride-hailing companies such as Uber and Lyft would go up from 20 cents per ride to $1.20, though the 20-cent fee would stay in place for so-called shared rides, such as those with UberPool, when multiple passengers traveling a similar route are picked up by the same driver. Ride-hail fees on luxury services like UberBlack would increase an additional $1, to $2.20 per ride.
Lawmakers said that, in addition to raising money, the goal is to encourage more riders to use shared services to fight traffic congestion. But it is unclear how this mechanism would shift riders’ behavior, because the bill also says the companies are not allowed to pass the costs of the fee on to riders.
Ride-hailing companies assailed the proposal, and Uber hinted that customers would still feel the pinch through other price adjustments.
“The House is proposing a significant tax increase that will disproportionately harm working families — and even worse, they want to do it secretly because they know their constituents rely on the affordability of ridesharing,” the company said in a statement.
The bill would eliminate what lawmakers say is a tax loophole for rental car companies, which would have to pay sales tax on vehicles they purchase — generating $110 million a year for the state.
It would also create a new, nine-tiered system to tax corporations. Currently, the state’s minimum corporate tax is $456 a year, a level lawmakers say was set 30 years ago and one that more than 400 companies with over $1 billion in sales paid in 2016.
The legislation would keep that for any business with sales less than $1 million a year, but increase it depending on the size of the company, with companies with $1 billion or more in sales paying at least $150,000.
The proposed change, which would generate up to $150 million for transportation each year, came after progressive lawmakers pushed the House to ensure that businesses would shoulder a share of the increases.
“We couldn’t get behind a bill that only burdened hard-working families,” said Representative Jack Patrick Lewis, who cochairs the House Progressive caucus with Representative Tricia Farley-Bouvier. “Corporations needed to play a role in the future of transportation of the commonwealth."
Richard A. Dimino, president of the business group A Better City, called the corporate tax plan a “pretty novel way” to fund transportation.
“Just the notion of corporate taxes being in the same bucket of a transportation funding program, it’s like apples and oranges,” he said.
The House is also pairing the revenue-raising legislation with a separate $14.5 billion transportation bond bill that would, in part, increase the amount of money towns and cities receive for roads and bridges.
The overall number there, however, falls more than $3 billion short of what Baker had proposed in a transportation borrowing bill last year. Representative William M. Straus, House chairman of the transportation committee, said Baker’s bill was built, in part, on “dangerous” revenue sources, including a regional climate and transportation pact the state has not yet joined.
Baker has said he opposes a gas tax increase and has instead pursued that multistate pact, which would establish a cap-and-trade system for transportation fuels and could increase gas prices by as much as 17 cents per gallon.
The House bill, however, says that if the state joins the agreement, it would be required to use it to offset the five-cent gas tax increase, to avoid hitting motorists with both fees at once.
Aides to Baker said Wednesday that the administration is reviewing the legislation.
Senate President Karen E. Spilka did not directly address details of the House bill. “We need to take action to change behavior to reduce congestion, provide fare relief to low income residents, and expand and improve public transportation in every region,” she said in a statement.