States all over the map on fuel taxes

By Keith Goble, Land Line state legislative editor | 2/7/2014

The uncertainty of federal funding spurred six states to act a year ago to come up with new revenue to get needed transportation work done. One year later, officials in numerous states are hopeful that more action could be in store.

Delaware Gov. Jack Markell is pushing a plan that would raise $500 million for roads and bridges during the next five years.

The main part of the plan would increase his state’s fuel tax rates by a dime. They haven’t changed in nearly 20 years.

The diesel tax rate is 22 cents per gallon, and the gas tax rate is 23 cents per gallon. A 10-cent increase to 32 and 33 cents, respectively, is expected to raise $50 million annually to pay for transportation work.

Another $50 million would be borrowed each year to pay for needed work.

The Democratic governor stated the state has many unmet transportation needs, yet the Department of Transportation is asked to make do with a funding process that is broken.

“The costs of not fixing it are real. ... Now is the time to repair the situation and spur our state’s economy forward.”

House Republicans are suggesting an alternative to hiking fuel taxes. Instead, they want to move the state Department of Transportation’s $230 million operating budget from the transportation trust fund back to the general fund over seven years.

House Minority Leader Danny Short, R-Seaford, said the change would make more money available for roads and bridges without increasing the burden on taxpayers.

He said the alternative plan would provide twice as much capital as the governor’s proposal.

“(In annual installments of) $35 million the first year and $70 million the next year, incrementally that gets us to about $1 billion over seven years, which is twice as much as what the governor is proposing in five years.” Short said in prepared remarks.

Similar back and forth on transportation funding is underway in statehouses across the country.

Iowa officials are working on possible solutions to address an annual transportation funding shortfall estimated at $215 million a year.

One bill on the move would authorize a 10-cent-per-gallon increase on gas and diesel over three years. Specifically, HSB514 would impose a 3-cent increase in July. The tax would increase another 3 cents in 2015 and 4 cents in 2016.

The increases would raise 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.

The change is expected to raise $230 million annually – enough to plug the shortfall for local and state road funding needs.

The bill advanced from a House subcommittee to the House Transportation Committee.

Also in Iowa, a Senate bill would tie the state’s fuel tax rates to inflation, which would allow for regular increases. SF2068 is in the Senate Transportation Committee.

In New Hampshire, one state senator wants to link future increases in the state’s fuel tax to inflation. Senate Transportation Chairman Jim Rausch, R-Derry, introduced a bill to increase the state’s fuel tax rate by 4 cents and authorize automatic increases for the 18-cent-per-gallon tax.

New Mexico lawmakers are expected to discuss multiple bills to increase the fuel tax rates. The first bill would increase taxes by 5 cents for a decade. HB74 would increase the 17-cent-per-gallon gas tax to 22 cents through June 2024. The 21-cent-per-gallon diesel tax would increase to 26 cents over the same 10-year period.

Both taxes would revert back to their previous levels once the period ends.

The tax increases would raise about $70 million annually. The additional tax revenue would also allow the state to issue up to $300 million in bonds for highway work.

The second bill, SB228, would increase the tax rate on gas and diesel by 13 cents per gallon over five years. Once fully implemented, the tax rates would be indexed for inflation.

In 2019, tax rates would increase by 5 cents per gallon. From 2020 through 2023 the tax rates would increase by 2 cents per gallon annually. By 2024, the automatic indexing would kick in.

Multiple tax increase options are offered at the Utah statehouse. Addressing a 24.5-cent-per-gallon tax rate that hasn’t changed since 1997, Rep. Jim Nielson, R-Bountiful, offered a couple of plans to address the issue. One bill would authorize a phased-in increase over the next four years.

HB240 would increase the fuel tax by 1.5 cents per gallon each year through July 2018. At that time, the tax would increase 7.5 cents to 32 cents per gallon.

His plan is estimated to raise $22 million in the first year.

The tax rate change wouldn’t resolve the state’s funding shortfall, but it would help the Utah Department of Transportation address an estimated $11 billion revenue shortfall during the next 25 years.

Nielson also offered another option. HB266 would implement annual increases in the fuel tax by tying the tax rate to inflation.

A South Carolina lawmaker wants to increase the state’s 16-cent-per-gallon rate by 10 cents.

Rep. B.R. Skelton, R-Pickens, introduced a bill that would raise the tax rate all at once. However, residents would get a state income tax break for the first two years. Afterward, they would pay the same 26-cent tax rate as truckers and other non-residents.

H4563 would raise $335 million a year for roads, but the tax rebate would remove $211 million in new revenue the first two years, leaving the state with about $124 million more a year for roads. After the tax rebate sunsets, the state would get the entire $335 million a year.

However, the plan faces a steep uphill battle. Gov. Nikki Haley has said she would veto any fuel tax increase. Instead, she has urged the state to do a better job of prioritizing money already available.

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