West Virginia Legislature OKs fuel tax freeze

| 6/26/2008

Truckers and other drivers who fuel up in West Virginia will be spared from a scheduled fuel tax increase. Lawmakers in other states have authorized, or are seeking, similar fuel cost saving rules.

At the encouragement of Gov. Joe Manchin, House and Senate lawmakers voted during a special session Wednesday, June 25, to stop an increase in the state’s 32.2-cent-per-gallon fuel tax rate scheduled for Jan. 1, 2009.

West Virginia law ties the diesel and gasoline tax to the average wholesale price of fuel. The tax can change at the first of each year because it is based on the average wholesale price between July 1 and Oct. 31.

The current wholesale rate is 11.7 cents. The base tax on fuel is 20.5 cents.

The bill – HB218 – caps the state’s wholesale fuel tax. To help make up for the loss of tax revenue for transportation, the measure earmarks $40 million to be routed from the state’s general revenue fund to the Division of Highways.

The temporary freeze is expected to save consumers 6 cents per gallon come the first of the year.

Critics say the tax freeze will impede efforts to keep up with road work and repairs. Car and truck drivers ultimately will pay the price for a few dollars saved at the pump, they say.

This will mark the second time in three years a scheduled fuel tax increase has been delayed. Manchin stepped in during the aftermath of Hurricane Katrina to impose a moratorium that prevented an expected increase of 3.8 cents per gallon on Jan. 1, 2006.

Efforts in other states
Governors in Georgia and Connecticut recently adopted their own fuel relief efforts. In addition, a North Carolina lawmaker is pursuing similar relief.

In Georgia, Gov. Sonny Perdue signed an executive order to suspend a scheduled increase in the state’s tax collected on fuel purchases that was due to take effect July 1.

Georgia law requires the state’s Department of Revenue to recalculate the state excise tax and sales tax on motor fuels every six months to adjust for changes in prices. The excise tax is 7.5 cents per gallon with the sales tax charged on top of that.

Connecticut Gov. M. Jodi Rell recently signed a bill into law to offer consumers a break from high fuel prices. The new law stops a scheduled fuel tax hike. It also allows more fuel stations to offer cash discounts.

Advocates for the change say the discounts could save consumers between 10 cents and 20 cents per gallon.

Discontent from consumers led lawmakers to scrap the scheduled July 1 increase in the state’s tax on wholesale earnings from fuel sales. The tax was slated to increase from 7 percent to 7.5 percent.

In North Carolina, state Rep. Cary Allred, R-Burlington, has introduced a bill that would eliminate a portion of the state’s 29.9-cent-per-gallon tax on fuel purchases. The tax is composed of a 17.5-cent flat rate and a 12.4-cent wholesale component.

Allred said he is pushing to eliminate the wholesale portion because North Carolina’s fuel tax is higher than the tax in neighboring states. He also said that every time the price of fuel increases, the state gets a “windfall” in tax money.

– By Keith Goble, state legislative editor