States pursue fuel tax increases to aid roads

By Keith Goble, Land Line state legislative editor | 3/1/2016

Officials in states that stretch from Delaware to Alaska are pursuing new revenue for road and bridge work via a bump in fuel tax rates.

Reasons cited for the stateside tax push include changing driving habits, more fuel-efficient vehicles, increasing construction costs, and fewer dollars available from the federal government.

A year ago 10 states acted to increase taxes on fuel. Legislators elsewhere this year picked up where their counterparts left off in pursuit of rules to raise revenue for transportation work.

In Missouri, the Senate Transportation, Infrastructure and Public Safety Committee has voted to advance a bill to increase the state’s 17.3-cent-per-gallon tax rate on gas and diesel. The current tax rate has remained unchanged since 1996.

SB623 would increase the tax on gas by 1.5 cents while raising the tax on diesel by 3.5 cents.

The Owner-Operator Independent Drivers Association and the Missouri Trucking Association support efforts to raise revenue for transportation work in the state. However, the groups oppose plans that call for truckers to foot more of the responsibility to help bail the state out of its funding hole.

“While OOIDA believes increasing the motor fuel tax is the most equitable way to generate additional revenue – and quite frankly the only realistic option in Missouri – any increase should be applied equally to both gasoline and diesel,” said OOIDA Director of State Legislative Affairs Mike Matousek.

An effort moving through the Alaska Senate with the backing of Gov. Bill Walker would raise the state’s existing fuel tax rate for the first time in nearly half a century.

The bill would double the 8-cent-per-gallon fuel tax rate to 16 cents. The rate has remained unchanged since 1970.

A change made to the bill in committee would make the rate hike contingent on the price of oil remaining below $85 per barrel. Regardless, the rate would revert to the current level on July 1, 2018.

The motor fuel rate hike would raise an estimated $32 million per year. Fuel tax revenue would continue to be routed to the state’s general fund.

Critics say they would be more likely to support the rate increase if the revenue was dedicated to highways.

Sen. Mike Dunleavy, R-Wasilla, added that it is premature for the state to raise taxes. Instead, he encouraged officials to pursue “pockets of money” already available to the state before pursuing additional revenue.

“We need to spend another year doing due diligence on these funds in various departments and divisions,” Dunleavy said.

One Hawaii bill would raise the state’s 16-cent fuel tax rate. Vehicle registration and weight tax fees would also be increased. The additional revenue would be earmarked for the state’s highway fund.

A change made to the bill in the Senate Transportation and Energy Committee would authorize the Senate Ways and Means Committee to decide on the tax and fee increase amounts. As introduced, SB2938 called for a 3-cent hike.

The Hawaii Department of Transportation has asked for an additional $50 million for highways.

An effort underway in Delaware would raise the state fuel tax rates by a dime.

The diesel tax rate is 22 cents per gallon and the gas tax rate is 23 cents per gallon.

The 10-cent increase would sunset in one year. The expiration date is intended to help the bill’s prospects for passage two years after a plan from Gov. Jack Markell to implement a permanent dime tax increase fell flat at the statehouse.

The tax increase is estimated to raise about $50 million. Revenue would be earmarked for critical infrastructure projects.

Critics of the proposal say spending reforms are necessary before additional taxes are approved.

In contrast to other states pursuing fuel tax increases to benefit roads, an effort underway in the Vermont Legislature would boost the state’s excise tax for purposes not related to roads.

The state now charges a 31-cent fuel tax on gas and diesel. It has remained unchanged since 1995.

H621 would increase the excise rate by 2 cents per gallon starting July 1, 2016.

The new revenue would not be used to help address the nearly 570 bridges in the state categorized as obsolete or the nearly 280 bridges described as structurally deficient. Instead, the money would be reserved for the state Agency of Transportation’s public transit program and to the Department of Public Safety for the State Police.

Matousek said the bill makes an existing problem significantly worse.

“Revenue generated from highway users should be used to build and maintain highways, including the hundreds of bridges in Vermont that are structurally deficient or functionally obsolete,” Matousek said. “H621 does not address Vermont’s highway and bridge needs nor is it a sustainable or appropriate source of revenue to support public transit and the State Police.”

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