Nebraska panel advances bill to add wholesale fuel tax

| 2/26/2008

A bill on the move in the Nebraska Legislature would add a new tax to wholesale fuel purchases.

The state is facing a projected $14 million shortfall in federal highway funds this year. As a result, senators in the state are looking at alternative sources of revenue to reduce the funding gap.

The Revenue Committee voted 6-1 to advance a bill to the full Legislature that would add Nebraska to the list of nine other states that apply a general sales tax on motor fuels at retail or wholesale levels.

Sen. Deb Fischer of Valentine, chairwoman of the Legislature’s Transportation Committee, introduced the bill that would establish a tax of 5 percent per gallon on the price of motor fuels at the wholesale level. The bill also would allow the tax rate to increase when fuel prices increase. The majority of revenue would be routed to the state’s Highway Trust Fund with one-third of the revenue earmarked for cities and counties.

A fiscal analysis on the bill – LB846 – shows the state would get an additional $42 million annually while cities and counties would receive $3.2 million.

It is expected that implementing the tax would increase the cost of fuel by 3 cents per gallon next year. It would rise another 4 cents in 2010.

Supporters say the current fuel excise tax is expected to remain flat while construction costs continue to escalate. They say the bill would generate revenue to help the Nebraska Department of Roads cover the costs for new highway projects and maintenance.

Others say the changes won’t necessarily result in higher prices at the pump because the tax would be collected when fuel is sold to retail stations.

Although a lot of sentiment is in favor of the effort, Gov. Dave Heineman said he is opposed to a new tax on fuel. The governor said now is not the time to increase fuel taxes. Heineman said he would rather tap into the state’s general fund to help pay for road work.

To view other legislative activities of interest for Nebraska in 2008, click here.

– By Keith Goble, state legislative editor