The Massachusetts House of Representatives overwhelmingly passed a package of fee and tax hikes late Wednesday night that would make it more expensive for motorists to get around, raising as much as $600 million and plowing that money into the MBTA, rural towns, and improvements to crumbling transportation infrastructure.
Six months before most seek reelection in the state primary, lawmakers approved the legislation, 113-40, which would raise the state’s gas tax 5 cents, to 29 cents per gallon. It would also hike fees in most cases by $1 per ride on ride-hailing companies such as Uber and Lyft, which lawmakers say would be barred from passing on the cost on to riders.
In aiming to raise between $522 million and $612 million annually, the bill also targets businesses: It would create a new system for corporate taxes, requiring companies with $1 billion or more in sales to pay at least $150,000. And it would eliminate a sales tax exemption on rental car company fleets.
The unusual timing to pursue a tax hike in an election year has hung over deliberations, and they come at an economic crossroads. The state has enjoyed back-to-back budget surpluses, but it’s facing broader uncertainty about the economy as coronavirus fears have left global markets reeling.
In passing the gas tax increase, which would be the second in seven years, lawmakers are trying to answer years of calls to seed the state’s crumbling roads and unreliable public transit options with new cash.
“The current condition of our transportation system is unacceptable, and we have to provide the resources to further address our roads, bridges and mass transit system,” said Representative William M. Straus, the House chairman of the transportation committee.
But raising the cost of gasoline is also a politically volatile option, and one voters have pushed back on before.
“It’s the kind of left-of center idea that working people don’t like,” said Mark Horan, a Democratic strategist who in 2014 worked on the effort to keep the law that hooked the state’s gas tax to inflation. Voters ultimately repealed it on that year’s ballot, and Horan said “we always knew we were behind.”
While lawmakers have pledged that some of the new revenue would be used to fund transportation in rural communities, as well as public bus systems outside of Greater Boston, a gas tax hike impacts most of the state’s travelers, Horan said.
“If you’re outside of Boston without public transportation, you have to drive. If you’re a plumber or an electrician, you have to drive. If you’re a nurse living 30 miles from a hospital, you have to drive. For them, it’s reaching into their pocket,” he said.
There were other political and financial considerations in play as well. Governor Charlie Baker, who has opposed raising the gas tax, is nonetheless also pursuing a multistate pact — known as the Transportation and Climate Initiative, or TCI — that would establish a cap-and-trade system for transportation fuels and could increase gas prices by as much as 17 cents per gallon along the East Coast.
And looming in roughly two years is still another potential tax hike: A 2022 ballot question that, if approved by voters, would add a surtax on household income over $1 million and raise as much as $2 billion annually to help fund transportation and education.
House Speaker Robert A. DeLeo has described the current tax bill as a “bridge” to that potential revenue windfall, a version of which was shot down before reaching the 2018 ballot amid a legal challenge. But his budget chair, Representative Aaron Michlewitz, warned that both the multistate initiative and wealth surtax, despite their “noble goals,” are still hypothetical and that any promised revenue could be at least three years away.
“It is undeniable that both of these have many challenges and hurdles in front of them before they will ever become reality,” Michlewitz said from the House floor Wednesday in arguing for the need to raise taxes now. He also gave a muted assessment of emissions initiative, which has sowed concern among other New England governors.
“To be perfectly blunt,” Michlewitz said, "it seems as if we’re the only ones leading and not many others are following.”
The transportation financing proposal spent months in development in the House, where lawmakers labored over how to craft a politically palatable package that could also inject a substantial amount of new money into the state’s struggling public transportation systems.
The corporate tax changes were key to gathering support from progressive lawmakers and advocates, who worried about leaning primarily on middle- and lower-class drivers to underwrite the bill.
On Thursday, the House is also expected to take up separate but related legislation: A $14.5 billion transportation bond bill that seeds various projects over several years through borrowing.
As the tax bill moves to the Senate, transit advocates suggested that chamber should raise the levy on gas even higher and authorize a tolling pilot with a goal of reducing traffic. The House bill calls for a study of these “congestion pricing” mechanisms and a to-be-determined date to create a plan to implement the study’s recommendations.
The House bill is “definitely progress, and we need that when the status quo is so painful for so many people across the state,” said Chris Dempsey, director of Transportation for Massachusetts, an advocacy group. “But we’re also looking forward to working with the Senate because we think there’s more that can be done.”
Senate leaders have not laid out a specific timeline for tackling legislation. The chamber’s president, Karen E. Spilka, has suggested it would look at using new revenue to offset public transit fares.
Some business leaders, meanwhile, have chafed at the change to the corporate tax structure. The Massachusetts High Technology Council, a trade group, has denounced the proposal, calling it packed with “taxes and fees that we just don’t need at this point."
Democrats, who hold a super-majority in the House, spent hours Wednesday dispatching with dozens of amendments, the vast majority of which died. Among the few that did pass, one would exempt fees on Uber and Lyft trips for riders with disabilities who use the services as part of a paratransit program such as the MBTA Ride.
Lawmakers also adjusted their proposal for future MBTA oversight, ultimately settling on an amendment that would expand the T’s current five-member governing board by adding a seat representing the city of Boston and another representing other communities served by the T.
The House bill calls for an additional 4 cents per gallon increase on the cost of diesel fuel and included language requiring the state, should it join TCI, to offset the five-cent gas tax increase, in an attempt to avoid hitting motorists with double pain at the pumps.
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.
It would also create a new, nine-tiered system to tax businesses. Currently, the state’s minimum corporate tax is $456 a year, a level lawmakers say was set 30 years ago.
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.