Kentucky fuel tax rates headed down on Jan. 1

By Keith Goble, Land Line state legislative editor | 12/30/2014

Fuel prices are down across the country and Kentucky is no different. When the New Year rings in on Thursday truckers and others fueling in the Bluegrass State will start saving even more money at the pump.

Kentucky’s tax on fuels – which is used to fund roads and bridge work – will drop by 4.3 cents per gallon starting Jan. 1. The change is due to a state law that partially ties the state’s tax rates to the average wholesale price of fuel, which causes automatic changes in the excise tax on gas and diesel.

The 1980 law authorizes fuel tax rates to be adjusted every three months. It was enacted to address concerns that rising fuel costs would result in people buying less at the pump. As a result, the state would get less tax money for road and bridge work.

However, the tax rate can also decrease as fuel prices dip – as they have done in four of the last five quarters.

The state Department of Transportation estimates the latest change caused by lower fuel prices will result in the loss of nearly $130 million for the Kentucky Road Fund. The amount is about 6 percent of the state’s highway program, which was forecast to have $2.25 billion in the current fiscal year from all sources.

“The gas tax accounts for more than half of the revenue in the Kentucky Road Fund,” Transportation Secretary Mike Hancock said in a recent news release. “A loss of revenue is always concerning, but a revenue impact of this magnitude is crippling.”

State lawmakers could address the issue during the regular session that starts Jan. 6, 2015. Efforts at the statehouse to change the 34-year-old rule are not uncommon.

One year ago Rep. Lynn Bechler, R-Marion, introduced a bill to remove any adjustment to the average wholesale price of fuel without direct action of the General Assembly.

Her attempt to amend the state law didn’t get serious consideration and died in committee.

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