Motor Vehicle Sales and State Highway Fund

Amend the Texas Constitution to dedicate upwards of two-thirds of Motor Vehicle Sales and Use Tax Revenue to the State Highway Fund.

Any specific fiscal policy recommendation regarding transportation funding must be viewed in the context of the constitutional amendment – approved by the 83rd Legislature – that will be presented to voters in November 2014. As noted above, if approved, that legislation will allocate between $800 million and $1.1 billion of additional revenue to the SHF each year.

However, the constitutional amendment diverts revenue to the SHF that would otherwise go to the Economic Stabilization Fund. To divert further funding to the SHF, an additional constitutional amendment would be necessary.

In fiscal year 2012, the Motor Vehicle Sales Tax (including use taxes and rental taxes) brought $3.6 billion into the state coffers, making it among the largest sources of state revenue . Yet most of that money goes into the General Revenue Fund (GR), most of which is consumed in other areas of government.

Since motor vehicle sales have a direct impact on the state’s transportation infrastructure, it is appropriate to dedicate upwards of two-thirds of that tax to the SHF to keep pace with transportation needs. The following chart shows that dedicating a third of Motor Vehicle Sales Taxes to the State Highway Fund would have a significant impact on state transportation financing:

Motor Vehicle Sales Tax Collections & Motor Fuels Taxes Deposited in State Highway Fund

Source: Comptroller of Public Accounts

Increasing the amount of motor vehicle taxes dedicated to the SHF could be adopted in lieu of or supplement the allocation of oil and gas production taxes to the SHF which is currently being proposed to voters.