Legislation Would Let Motorists Deduct Tolls Paid To Ohio River Bridge Boondoggle

Indiana taxpayers were already funding the lion's share of the costs of constructing two new bridges over the Ohio River Bridge thanks to a one-sided agreement former Gov. Mitch Daniels negotiated with Kentucky officials. Not only are Hoosiers shouldering a disproportionate share of the constructions costs for the two bridges, but they will also pay a disproportionate share of the tolls to be collected from motorists who use the two bridges since far more Hoosiers commute into Louisville regularly than the number of Kentuckians traveling to Indiana. The need for these two new bridges was never justified before they were taken using the en vogue P3 method of publicly financing infrastructure projects..

Under legislation sponsored by Sen. Ron Grooms (R-Jeffersonville), immediately neighboring Hoosier motorists would be allowed to take a deduction on their income taxes for a portion of the bridge tolls they pay each year, thereby shifting part of the burden of paying the tolls to state taxpayers. SB 258 allows motorists residing in Clark and Floyd Counties who pay at least $100 in tolls annually for which they are not reimbursed to take a deduction of up to $500 on their state tax returns. The annual cost of offering the deduction could be as much as $1 million according to a fiscal analysis prepared by the Legislative Services Agency, an amount which would grow 3% to 5% annually thereafter once implemented in 2016.

The fiscal analysis estimates that deductible toll payments will range from $20 million to $32.5 million annually for 8 to 13 million trips. The revenue loss is calculated by applying that amount to a state income tax rate of 3.23%. The deduction is arbitrary in that it precludes Indiana motorists residing in counties other than Clark and Floyd who also commute into Louisville daily from receiving the tax break afforded to residents in those two counties.

I don't blame Sen. Grooms for sponsoring the legislation. I'm sure his constituents are up in arms about having to pay the costly tolls during their daily commutes to Louisville, something they've never been required to do up to now. By shifting those toll costs to the state, that means less money the state will have to fund other state government operations. Even worse, if the tolls prove inadequate to cover the debt service on the bonds, the state's highway fund will have to serve as a backstop to pick up the shortfall, meaning less money for highway projects elsewhere around the state. This is what happens when major public works projects are driven by big campaign contributors rather than serious public policy planners.