Higher fuel taxes up for consideration in at least 17 states

By Keith Goble, Land Line state legislative editor | Tuesday, March 14, 2017

State officials in a growing number of states are pushing for higher fuel tax rates to get needed road work done.

The federal government has not raised the nationwide fuel tax in more than two decades. As a result, responsibility for infrastructure funding has increasingly fallen to states. To make matters worse, higher-mileage vehicles, changing driving habits and rising costs have contributed to reduced revenues.

During the past four years 19 states have acted to increase or revise their fuel tax collections. Elected officials in at least 17 states stretching from West Virginia to Hawaii are discussing whether to collect more tax on fuel purchases to pay for upgrading roads and bridges.

The Owner-Operator Independent Drivers Association believes that when there is a valid need to generate additional revenue increasing fuel tax rates is the most equitable way to accomplish that goal. Mike Matousek, OOIDA director of state legislative affairs, points out that any increase should be applied equally to both gasoline and diesel. He adds that safeguards are also necessary to keep the additional revenue for roads and bridges.

Below is recent activity at statehouses followed by Land Line.

Arkansas
A two-bill package moving through the House would raise the state’s tax on gas and diesel by 6.5 percent to pay for a highway funding plan that relies on bonds. The plan would raise about $210 million annually for state and local road work.

HB1726 would allow the state Highway Commission to issue bonds for 20 years. HB1727 would include the state’s 6.5 percent sales tax on the wholesale price of fuel to pay for the bonds.

Arkansas already collects a 21.5-cent-per-gallon tax on gas purchases and a 22.5-cent tax on diesel.

The new sales tax is estimated to increase fuel rates by about 10 cents.

If approved by the state Legislature and the governor, voters would get the final say on the issue. Gov. Asa Hutchinson says he supports the legislation.

HB1727 would also designate the first $2.8 million each year collected through the diesel tax to improve the state’s portion of the National Highway System.

The House Public Transportation Committee voted to send both bills to the chamber floor.

California
One bill on the move in the Senate would raise $5.5 billion annually for state and local roads, trade corridors and public transit.

The main component of the package would raise nearly $3.8 billion, mostly via increases in the gas and diesel tax rates.

The state’s current tax rates are about 38 cents per gallon, according to the American Petroleum Institute. The excise components making up the tax rates are 27.8 cents for gas and 16 cents for diesel.

SB1 would increase the excise rate on gas by 12 cents over three years.

Not to be outdone, the excise rate on diesel would be increased by 20 cents over the same time period. Revenue from the diesel tax would be designated for freight, trade corridors and goods movement.

“With projected funding levels insufficient even to maintain the status quo, it is going to get worse if we do nothing. It’s going to get worse real quick,” Sen Jim Beall, D-San Jose, said during discussion in the Senate Transportation and Housing Committee.

Hawaii
Gov. David Ige is behind a bill to increase the state’s fuel tax from 16 cents to 26 cents per gallon. SB1012 would also raise annual vehicle registration fees and increase the annual per-pound motor vehicle weight tax to help the state address $100 million in needs for the state highway fund. The bill is in the Senate Ways and Means Committee.

Illinois
One House bill would increase the state’s 19-cent gas tax rate by a dime to 29 cents beginning on July 1, 2017. The 21.5-cent diesel rate would increase to 31.5 cents.

The state’s roads would receive 60 percent of the additional revenue with the remainder allotted for local governments.

HB3136 is scheduled for a hearing Tuesday, March 14, in the House Transportation: Regulation, Roads and Bridges Committee.

Indiana
The House voted to advance a bill that is touted to help the state address the $1.2 billion annually needed for roads over the next 20 years.

Among the options included in the 76-page bill to raise revenues is a plan to raise the state’s 18-cent-per-gallon gas tax and the 16-cent diesel tax by 10 cents. In addition, the state’s 11-cent surcharge tax on diesel would nearly double to 21 cents.

The taxes would also be indexed on an annual basis through 2024. Annual adjustments would be capped at one penny.

The diesel surtax would be collected at the pump instead of through quarterly tax filing reports.

Rep. Mike Braun, R-Jasper, spoke in favor of HB1002 on the House floor. He told lawmakers that truck drivers will pay the biggest share.

“The typical owner-operator will pay $2,000 a year (in state fuel taxes),” said Braun, owner of Meyer Distributing and Meyer Logistics of Jasper, Ind.

Kansas
At least three dozen road projects in the Sunflower State have been postponed in recent months due to a nearly $350 million shortfall for the fiscal year that ends June 30. In an effort to give transportation a shot in the arm, multiple bills at the statehouse would raise the state’s fuel tax rate by as much as 11 cents.

The state now collects 24 cents per gallon on gas purchases and 26 cents on diesel purchases.

SB224 would help eat into the state’s funding deficit via a 5-cent tax increase to both tax rates.

HB2237 and HB2382 would increase tax rates by 11 cents to 35 cents and 37 cents, respectively.

In addition, tax revenues allotted to the state highway fund would be increased from 66.3 percent to 76.8 percent.

The House bills are in the House Taxation Committee. SB224 is scheduled for consideration on Friday, March 17, in the Senate Assessment and Taxation Committee.

Minnesota
State lawmakers have battled back and forth in recent years to come up with a deal to raise revenue for infrastructure. One option under review this year would increase the state’s fuel tax rate by 10 cents. HF1899/SF1799 would raise the 28.5-cent gas and diesel rates to 38.5 cents. The change would take effect on Oct. 1, 2017.

Missouri
A renewed effort in the Senate would increase the state’s 17.3-cent-per-gallon fuel tax rate. The current tax rate has remained unchanged since 1996.

Senate Joint Resolution 3 would raise the gas tax rate by 1.5 cents and the diesel rate by 3.5 cents.

Trucking groups in the state support efforts to raise revenue for transportation work. However, they are opposed to the proposal calling for truckers to foot more of the responsibility to help bail the state out of its funding hole.

The resolution would give voters the final say.

Montana
A shortfall in the state’s highway revenue fund one year ago led to the delay of $144 million for 30 highway projects.

Gov. Steve Bullock has since called for more revenue to help get road work done. As a result, state lawmakers are looking at whether to raise the state’s 27-cent gas tax and 27.75-cent diesel tax for the first time since 1993.

HB473 would increase the tax rates by 8 cents and 7.25 cents each to reach 35 cents. The additional tax revenue would result in another $60 million annually for state and local roadways.

“This bill is intended to be a long-term fix ... to a significant funding problem in our state,” Rep. Frank Garner, R-Kalispell, said during a recent hearing on the bill.

He added that as much as 40 percent of the cost would be footed by out-of-state drivers.

“Let’s have them help pay for the infrastructure they are using.”

The bill awaits additional consideration in the House Transportation Committee.

New Mexico
In an effort to address state road funds that have dipped below $400 million, Senate lawmakers voted 29-13 to send a bill to the House that would increase the state fuel tax.

New Mexico now collects a 17-cent-per-gallon tax on gas purchases. Diesel purchases include a 21-cent tax rate.

SB95 would raise the gas tax by a dime to 27 cents per gallon. The diesel rate would increase by a nickel to 26 cents.

The tax increases would raise about $120 million a year, according to state estimates.
Despite the interest at the statehouse to collect more tax at the fuel pump, Gov. Susana Martinez recently reiterated her opposition to outright tax increases. Instead, she wants to work on comprehensive tax reform.

Oklahoma
Gov. Mary Fallin has called for boosting fuel tax rates to get infrastructure work done.

During her State of the State address, Fallin proposed methods to help the state minimize the impact of a roughly $870 million budget hole. One option touted by the governor would be to raise tax rates to the regional state average. Specifically, the plan would raise the gas tax by 7 cents and the diesel tax by 10 cents to 24 cents each.

Oregon
Various transportation funding options are on the table at the statehouse. Among the options being considered to raise new revenue is a 5-cent increase in the state’s 30-cent-per-gallon fuel tax.

HB2121 would implement the first rate increase in January 2023. The tax rate would be raised another nickel every five years.

Gov. Kate Brown has said she will make a strong push this session to get a transportation funding package through the Legislature.

South Carolina
A bill halfway through the statehouse would increase the state’s fuel tax rate by at least 10 cents.

Earlier this month the Republican-led House voted by a veto-proof margin to increase the state’s 16.75-cent tax by a dime. A Senate subcommittee has since voted to raise the tax by 12 cents.

Gov. Henry McMaster was initially non-committal on how he views a fuel tax increase. In the past week the Republican governor made it clear he is opposed to raising taxes.

Officials have said something needs to be done to help the state address the estimated $1 billion annually the state Department of Transportation says is necessary to cover infrastructure needs.

H3516 awaits further consideration in the Senate. If approved there, it would move back to the House for consideration of changes before heading to the governor’s desk.

Tennessee
The Senate Transportation and Safety Committee voted on Monday, March 13, to advance an amended version of Gov. Bill Haslam’s effort to increase the state’s fuel rates.

The governor has called for raising the state’s 21.4-cent gas rate and 18.4-cent diesel rate by 7 cents and 12 cents, respectively. The taxes now provide only enough money to cover the cost of road maintenance, but not construction.

The revised bill would raise the tax rates by 6 cents and 10 cents over three years.

A provision dropped from the bill, SB1221, is the governor’s proposed indexing of the fuel rates.

A similar effort in the House was amended to remove fuel tax increases and instead relies on sales taxes for road work.

Texas
One House bill would boost revenue for roads via collection of fuel tax on professional drivers. HB2513 would raise the state rate on diesel by 2 cents to 22 cents per gallon. The change would take effect on Sept. 1, 2017.

Utah
The Legislature voted to send a road funding bill to the governor’s desk that would raise $14.6 million in additional revenue by 2020.

The bill would impose automatic increases in the state’s 29.4-cent-per-gallon fuel tax. A built-in ceiling would cap fuel tax rates at about 40 cents.

Taxes are estimated to increase about 0.6 cents per gallon in 2019 and 1.2 cents in 2020 by reworking the complex formula for fuel taxes approved by state lawmakers in 2015. At that time, legislators imposed a 12 percent tax on fuel once the wholesale price reaches $2.45 per gallon. Rep. Mike Schultz, R-Hooper, said during House floor discussion that fuel prices have since dropped and the state remains in need of additional revenues.

SB276 would trigger a 16 percent tax on fuel once the wholesale price reaches $1.78 per gallon.

West Virginia
Multiple bills pursue new revenue for roads via the state’s fuel tax collection.

The state now collects 20.5 cents per gallon on gas and diesel purchases.

The first bill, SB260, would impose a 5-cent increase when the average wholesale price is below $2 per gallon.

Another effort, SB477/HB2814, would increase the tax rate by 10 cents to 30.5 cents per gallon.

The bills are in their respective transportation committees.

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