A new law increasing the fuel tax rate in Iowa by 10 cents took effect over the weekend. It marks the state’s first tax rate increase in more than one-quarter century.
Gov. Terry Branstad signed a bill into law last week to increase the tax rate on gas, diesel and alternative fuels effective Sunday, March 1. The governor’s signature came only hours after the Legislature sent the tax increase to his desk to address an annual funding shortfall estimated at $215 million a year for city, county and state roads.
The Senate approved SF257 Tuesday on a 28-21 vote. House lawmakers followed suit the same day on a 53-46 vote.
The increase raises the tax rate on diesel from 22.5 cents to 32.5 cents and the tax rate on gas from 21 cents to 31 cents. Each penny increase is estimated to raise $23 million.
Paul Trombino, director of the state Department of Transportation, said the tax changes are expected to raise enough to plug the shortfall for critical local and state road funding needs.
Sen. Tod Bowman, D-Maquoketa, said the state needed to take action because they cannot wait any longer to approve more money for roads and bridges.
“Many of our rural bridges are closed or have weight restrictions because there’s no money to repair them,” Bowman said during Senate floor discussion on the bill. “We can’t continue to kick this can down the road.”
Another component of the funding plan will result in permit fee increases for oversize and overweight trucks beginning Jan. 1, 2016. The fee increases are as follows:
- The annual permit fee on vehicles up to 80,000 pounds increases from $25 to $50.
- The annual permit fee on vehicles up to 156,000 pounds increases from $300 to $400.
- The single-trip permit fee increases from $10 to $35.
- The annual all-systems permit fee increases from $120 to $160.
An additional fee increase will be implemented in 2017.
The Iowa DOT is also required to identify $10 million in cost savings during each of the next two years.
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