UPDATED: Officials in 20 states look to change fuel tax collections

By Keith Goble, Land Line state legislative editor | 3/1/2019

During the past six years nearly 30 states have raised or reformed their fuel tax rates. Despite the progress made to address transportation funding needs, legislators more states continue to pursue additional revenue enhancements.

The Owner-Operator Independent Drivers Association believes increasing the fuel tax is the most equitable way for states to generate additional revenue.

Below is a list of many states so far this year to have discussed or introduced legislation to adjust to fuel tax rates.

Alabama

Gov. Kay Ivey announced on Wednesday her Rebuild America plan to raise revenue for road and bridge work throughout the state.

The main component of Ivey’s plan is to raise the state’s fuel tax rates by a dime.

The state now collects 18 cents per gallon on gas and 19 cents on diesel fuel. The fuel tax rates have remained unchanged since 1992.

“After 27 years of stagnation, adequate funding is imperative to fixing our roads and bridges in dire need of repair,” Ivey said in remarks announcing her plan.

Also included is a plan to index the state’s excise tax rate. The change to indexing would allow for the fuel tax to rise automatically with the rate of inflation.

Revenue would be routed to state, county and municipal governments to fund infrastructure improvement, preservation and maintenance projects.

The proposal can be considered by legislators during the regular session that begins March 5.

Arizona

A fuel tax bill moving through the House continues to undergo changes.

As introduced, House Transportation Committee Chairman Noel Campbell, R-Prescott, said his bill would ensure that everyone is paying their fair share of ongoing maintenance of the state’s transportation system.

Campbell says the state is nearly $1 billion per year behind in transportation obligations. He adds that the state’s fuel tax is unchanged since 1991.

The amended version of HB2536 would leave the 18-cent gas tax rate unchanged. The tax on diesel, however, would rise to 26 cents.

As introduced, the bill calls for more than doubling the gas tax rate and nearly tripling the diesel tax.

Electronic and hybrid vehicles would be subject to a road use fee.

Registration fees for vehicles operated by a combination of electricity and other fuels would be $33 per year. Owners of all electric vehicles would pay $83 annually.

“This is a tax. It is a revenue tax for users of our roads,” Campbell said during discussion on the bill in the House Ways and Means Committee. “Broadly, the whole purpose of this thing was to bring in vehicles using our roads that are not paying their fair share, such as electric vehicles and hybrids.”

The bill awaits further consideration on the House floor.

Arkansas

Nearing passage at the Arkansas statehouse is a bill to raise road revenue via a new wholesale fuel tax, increased license fees on hybrid and electric vehicles, and other state revenue sources.

SB336 would raise nearly $95 million annually for the state Department of Transportation.

Unchanged since 1999, the state collects a 21.5-cent excise tax on gas purchases. A 22.5-cent rate is collected on diesel purchases.

The bill would implement a wholesale fuel tax that would amount to a 3-cent-per-gallon gas tax increase. The diesel tax would increase by 6 cents. The new tax would also be indexed to increase by up to one-tenth cent per year over the next decade.

The wholesale tax is estimated to raise $59 million annually.

Another $1.97 million would come from increasing registration fees for hybrid and electric vehicles. Electric vehicle owners would pay an additional $200 for registration and hybrid car owners would pay an extra $100.

Separately, casino taxes totaling $35 million would be routed to roads and bridges.

The legislative action follows Gov. Asa Hutchinson proposed funding plan that would raise more than $400 million each year with counties and cities receiving about one-quarter of the amount. The majority of revenue would come from extending permanently the half-cent sales tax that is dedicated to highways. The tax was implemented in 2012 with a 2023 sunset date.

House lawmakers are nearing passage of legislation to make the extension permanent. If approved by the chamber, HJR1018 would move to the Senate. Voters would get the last word on the issue.

SB336 awaits a House floor vote. If approved, it would head back to the Senate for approval of changes before it could move to the governor’s desk.

Hawaii

Gov. David Ige is calling for legislators to increase the state’s fuel tax and other vehicle fees to bolster the state highway fund.

HB1054/SB1280 would raise the 16-cent fuel tax rate by a nickel to 21 cents on Hawaii Island and neighboring islands. The tax on Oahu would increase to 22 cents.

Vehicle registration fees and the state vehicle weight tax also would increase.

All revenues would be routed to the state highway account.

The bills await consideration in multiple committees.

Idaho

One bill working its way through the Idaho Legislature would not raise fuel taxes. Instead, it would put more money from vehicle taxes and fees into roads.

Idaho law now directs 5 percent of the state’s Highway Distribution Account to the Idaho State Police. The account is largely funded from fuel taxes and vehicle fees.

The House voted to advance a bill to transition funding for troopers from the fuel tax to the state’s General Fund.

The bill would phase out trooper funding from vehicle taxes and fees over five years. Ultimately, the $18 million now going to the State Police would instead go to state and local roads.

H88 is in the Senate Transportation and Defense Committee.

Indiana

One state lawmaker wants to reverse last year’s repeal of the state’s motor carrier surcharge tax.

A 2018 law nixed collection of the surcharge tax in exchange for charging more tax at the fuel pump. Specifically, 19 cents more per gallon for diesel to total 48 cents in excise tax.

According to a fiscal note attached to the 2018 law, the change is expected to increase revenue to the state highway fund and decrease revenue to local units of government from the taxes paid by motor carriers.

Rep. Doug Miller, R-Elkhart, has introduced a bill to reimpose the surcharge tax. The excise tax on diesel would be reduced by the same amount.

The bill, HB1346, is in the House Roads and Transportation Committee.

A separate bill from Rep. Ryan Lauer, R-Columbus, would halt future indexing of fuel tax rates. HB1670 would keep the existing fuel tax rates at their current rates.

The percentage of tax revenue earmarked for counties, cities and towns would increase by nearly 3 percent and 5 percent respectively. Additionally, the inflation adjustment of supplemental fees to register electric and hybrid vehicles would be eliminated.

The bill is in the House Ways and Means Committee.

Iowa

A bill in the House Transportation Committee would peel back the state’s fuel tax rates.

Currently, the excise tax collected on gas is 30.5 cents while the diesel fuel tax rate is set at 32.5 cents.

Sponsored by Rep. Jeff Shipley, R-Jefferson, HF168 would reduce the gas and diesel rates by about 6 cents in 2020. The rates would be cut another 3 cents each over the next three years.

At that time, the gas and diesel rate would settle at about 15 cents per gallon.

Kansas

A state task force has recommended that state lawmakers pursue more money for transportation through sales taxes, the fuel tax, and a fee on electric vehicles.

Multiple efforts are underway in the statehouse to address road funding needs via a fuel tax increase.

HB2370 and SB188 would raise the 24-cent gas tax by 3 cents to 27 cents over three years. The 26-cent diesel tax would be increased by 4 cents to 30 cents over the same time period.

A similar effort, HB2381, would raise tax rates for gas and diesel by 6 cents, to 30 cents and 32 cents, respectively. The increases would take place at one time.

The bills are in committee.

Kentucky

A bill in the House Transportation Committee would raise certain vehicle fees and taxes to help generate $400 million for transportation purposes.

Kentucky now collects 26 cents per gallon on gas purchases. Diesel purchases net the state 23 cents per gallon.

HB517 would raise the state fuel tax rates by 10 cents. It also would expand fees on certain vehicles, including electric vehicles.

Passage would require a two-thirds majority of each chamber because it is a nonbudget session.

Maine

If one Maine state lawmaker gets her way the gap in collection of diesel and gas taxes will be temporarily widened.

Maine now collects a 30-cent tax on gas purchases and a 31.2-cent tax on diesel.

Sponsored by Rep. Denise Tepler, D-Topsham, LD466 would impose an additional 5 cents per gallon on diesel fuel to total 36.2 cents. The tax increase would sunset in November 2022.

The new revenue would be earmarked for construction, reconstruction, maintenance and repair of roads and bridges.

The legislation can be considered in the Joint Committee on Transportation.

Minnesota

Gov. Tim Walz has announced his two-year budget proposal to raise revenue for items that include statewide transportation projects.

The main component of the budget proposal would nearly double the state’s excise tax on fuel purchases.

Walz has said the state needs $18 billion over the next two decades simply to operate and maintain current infrastructure. His proposal is estimated to raise $18 billion over the next 20 years.

To help eat into the funding gap he wants to increase the 28.5-cent excise rate by 20 cents over two years. At that time, the excise rate would reach 48.5 cents.

The tax increases, however, would not end there. The governor’s budget proposal also would index the tax to inflation, which would allow for regular increases.

It is estimated that the tax increases would raise about $6.5 billion over 10 years.

The motor vehicle sales tax and registration tax also would increase. The vehicle taxes are estimated to raise another $4 billion over the same time period.

One Senate bill would increase the state’s 28.5-cent excise rate on gas and diesel fuel. SF367 would increase the tax by 10 cents to 35 cents.

The bill is in the Senate Transportation Finance and Policy Committee.

Missouri

Transportation officials in Missouri say a dire situation to fund road and bridge work will only worsen until legislators get a deal done.

The state’s Department of Transportation has said there is an $825 million gap in annual road and bridge funding.

MoDOT Director Patrick McKenna says a federal grant provided to the state will be used to study alternatives to the fuel tax. He adds that increasing the state’s vehicle registration fees has support of some state officials. In addition, a vehicle-miles-traveled fee is an option down the road.

In the meantime, one House bill would raise the state’s 17-cent-per-gallon fuel tax to provide a funding boost.

Sponsored by Rep. Steve Butz, D-St. Louis, HB822 would increase the tax rate by 10 cents over five years.

The increase is estimated to raise $30 million annually.

The bill is in the House Transportation Committee.

Nevada

Three efforts underway in the Nevada Senate would tap truckers to help cover expenses related to road and bridge work.

SB48 and SB138 would authorize county commissions in counties with fewer than 100,000 people to add a tax of up to 5 cents per gallon on diesel fuel purchases. SB61 would authorize the creation of a city diesel fuel tax of up to 5 cents on diesel fuel purchases.

SB48 and SB138 would enable 15 of the state’s 17 counties to charge more at the pump. The other two counties – Clark and Washoe – already are permitted to collect extra tax on diesel. All other counties in the state can charge a nickel tax on gas.

Nevada’s fuel tax rate is set at 23 cents for gas and 27 cents for diesel.

SB48 and SB138 would require the additional diesel fuel tax revenue raised in rural counties to be used for local road construction and maintenance. SB61 would allot the new revenue for street and highway construction, maintenance and repair.

Both bills include a provision for eligible IFTA carriers to receive a reimbursement of the county tax consumed outside of Nevada.

Additionally, SB48 and SB138 would allot a portion of tax collections for truck parking in counties that sell more than 10 million gallons of diesel annually. Specifically, parking areas would be made available in Elko County for trucks with a gross weight more than 10,000 pounds.

County commissions would need to pass an ordinance with two-thirds majority to implement the extra tax. Another option would be for a majority of voters to approve a question during a general election.

SB48 and SB61 are scheduled for hearings in the Senate Revenue and Economic Development Committee.

New Hampshire

Pursuit of a fuel tax increase is also underway at the New Hampshire statehouse.

A Democrat-led bill would increase the state’s 22.2-cent excise rate on fuel by 6 cents to 28.2 cents. The revenue would be allotted for road and bridge projects.

HB538 is scheduled to be heard Feb. 7 in the House Public Works and Highways Committee.

New Mexico

Multiple bills offered in the statehouse include a provision to raise the state’s fuel tax rates by up to a dime.

SB506 would increase the current 17-cent excise tax on gas to 27 cents. The tax is unchanged since 1993. The 21-cent excise tax on diesel would be raised 5 cents to 26 cents.

SB504 would increase the gas tax by 10 cents and raise the diesel fuel tax by 6 cents. SB609 would raise the gas rate by 4 cents and the diesel rate by 5 cents.

The bills would raise from $75 million to $128 million annually for highway work.

North Dakota

Two failed efforts sought to increase the state’s fuel tax rate to boost transportation funding.

The state now collects 23 cents per gallon on diesel and gas sold. The tax raised nearly $166 million for road and transit work in the past year.

The House and Senate bills called for increasing the excise rate by 7 cents to 30 cents.

Ohio

Gov. Mike DeWine wants state legislators to get a deal done to significantly increase the state’s fuel tax rate.

Advocates for additional transportation revenue say more money is needed to fill the gap left by a now-defunct $1.5 billion in turnpike bond funding.

Rep. Scott Oelslager, R-North Canton, has introduced a bill to achieve the goals set by the governor.

HB62 would increase the 28-cent fuel tax by 18 cents to 46 cents on July 1, 2019. The tax would increase each July thereafter with inflation.

The Ohio Department of Transportation says a one-cent increase in the fuel tax would raise $67 million per year.

The General Assembly must approve the transportation budget by the end of March.

Separately, legislators in the state House and Senate have shown support for a plan to raise the state’s 28-cent fuel tax for out-of-staters. In-state fuel purchasers would be provided a tax break to relieve them of the additional tax burden.

Vermont

One House bill would temporarily raise the state’s fuel tax by to help get local road work done.

Vermont now collects a 12-cent excise rate on gas purchases and a 28-cent rate on diesel. Additional taxes and fees on both fuels amount to 31.19 cents on gas purchases and 32 cents on diesel purchases.

Sponsored by Rep. Kari Dolan, D-Waitsfield, H384 would raise the state’s fuel tax rates by 4 cents over five years.

It is estimated the additional tax collection would raise $10 million for municipal roads each year.

Washington

A bill scheduled for a public hearing today in the Senate Transportation Committee would raise the state’s fuel tax rate.

The state fuel tax rate now is set at 49.4 cents per gallon.

SB5971 would increase the tax by 6 cents to 55.4 cents.

The bill is part of a larger transportation funding package that includes bonds and vehicles fees. The package would fund projects that include highway maintenance, ferries, and culvert replacement work.

Wisconsin

Gov. Tony Evers was expected to announce Thursday his two-year state budget proposal. One component of the proposal is expected to be an increase to the state’s fuel tax rate.

The governor previously named a bipartisan task force to look at ways for the state address transportation needs.

In his State of the State address earlier this year, the Democratic governor said the task force will come up with a workable solution to include in his budget plan for the upcoming two-year budget cycle. Among the solutions to be considered is a fuel tax increase. Other options include increasing vehicle registration fees, adding tolls, or a combination of the revenue sources.

Republicans are advocating for an income tax cut to help offset an increase in the state’s 32.9-cent fuel tax rate.

 

 

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