UPDATE: Higher fuel taxes up for consideration in 16 states

By Keith Goble, Land Line state legislative editor | 3/28/2017

State officials around the country continue to discuss efforts pushing for higher fuel tax rates to get needed road work done.

The federal government has not raised the nationwide fuel tax in more than two decades. As a result, responsibility for infrastructure funding has increasingly fallen to states. To make matters worse, higher-mileage vehicles, changing driving habits, and rising costs have contributed to reduced revenues.

During the past four years 19 states have acted to increase or revise their fuel tax collections. Elected officials in 16 states stretching from Maine to Alaska are discussing whether to collect more tax on fuel purchases to pay for upgrading roads and bridges.

The Owner-Operator Independent Drivers Association believes that when there is a valid need to generate additional revenue increasing fuel tax rates is the most equitable way to accomplish that goal. Mike Matousek, OOIDA director of state legislative affairs, points out that any increase should be applied equally to both gasoline and diesel. He adds that safeguards are also necessary to keep the additional revenue for roads and bridges.

Below is recent activity at statehouses followed by Land Line.

A bill backed by Gov. Bill Walker would triple the state’s 8-cent-per-gallon fuel tax rate over two years. Specifically, HB60/SB25 would increase the tax on gas and diesel from 8 cents to 16 cents on July 1. Another 8-cent increase to 24 cents would take effect on July 1, 2018.

Gov. Walker says the state’s existing tax rates are “outdated.”

During the recent hearing on the bill the Alaska Trucking Association voiced support for the tax increase. Executive Director Aves Thompson said the change is acceptable as part of a long-term fiscal plan.

“The Alaska Trucking Association has long supported a fuel tax increase if the funds could be dedicated to transportation needs,” Thompson told the Senate Transportation Committee. He added that the group would prefer to see phase two of the motor fuel tax increase delayed until 2019 to allow truck operations to incorporate the increases into their rate schedules.

One bill headed to the Senate floor would raise $5.5 billion annually for state and local roads, trade corridors, and public transit.

The main component of the package would raise nearly $3.8 billion, mostly via increases in the gas and diesel tax rates.

The state’s current tax rates are about 38 cents per gallon, according to the American Petroleum Institute. The excise components making up the tax rates are 27.8 cents for gas and 16 cents for diesel.

SB1 would increase the excise rate on gas by 12 cents over three years.

Not to be outdone, the excise rate on diesel would be increased by 20 cents over the same time period. Revenue from the diesel tax would be designated for freight, trade corridors and goods movement.

The 1.75 percent sales tax applied to diesel purchases would also be increased by 4 percent to 5.75 percent.

“Our roads, highways and bridges are crumbling because our state has failed to invest in our infrastructure – and tens of millions of California commuters, businesses and travelers are literally paying the price for our lack of action,” Senate Governance and Finance Committee chairman Mike McGuire, D-Healdsburg, said during a recent hearing.

One House bill would increase the state’s 19-cent gas tax rate by a dime to 29 cents beginning on July 1, 2017. The 21.5-cent diesel rate would increase to 31.5 cents.

The state’s roads would receive 60 percent of the additional revenue with the remainder allotted for local governments.

HB3136 is scheduled for a hearing Tuesday, March 28, in the House Transportation: Regulation, Roads and Bridges Committee.

A bill scheduled for consideration today in the Senate Tax and Fiscal Policy Committee is touted to help the state address the $1.2 billion annually needed for roads over the next 20 years. House lawmakers already approved it.

Among the options included in the 76-page bill to raise revenues is a plan to raise the state’s 18-cent-per-gallon gas tax and the 16-cent diesel tax by 10 cents. In addition, the state’s 11-cent surcharge tax on diesel would nearly double to 21 cents.

The taxes would also be indexed on an annual basis through 2024. Annual adjustments would be capped at one penny.

The diesel surtax would be collected at the pump instead of through quarterly tax filing reports.

Rep. Mike Braun, R-Jasper, spoke in favor of HB1002 on the House floor. He told lawmakers that truck drivers will pay the biggest share.

“The typical owner-operator will pay $2,000 a year (in state fuel taxes),” said Braun, owner of Meyer Distributing and Meyer Logistics of Jasper, Ind.

At least three dozen road projects in the Sunflower State have been postponed in recent months due to a nearly $350 million shortfall for the fiscal year that ends June 30. In an effort to give transportation a shot in the arm, multiple bills at the statehouse would raise the state’s fuel tax rate by as much as 11 cents.

The state now collects 24 cents per gallon on gas purchases and 26 cents on diesel purchases.

HB2412 and SB224 would help eat into the state’s funding deficit via a 5-cent tax increase to both tax rates.

HB2237 and HB2382 would increase tax rates by 11 cents to 35 cents and 37 cents, respectively.

In addition, each bill would increase tax revenues allotted to the state highway fund to between 66.3 percent and 76.8 percent.

Gov. John Bel Edwards says he supports legislative efforts to help the state address a $13 billion backlog for transportation needs. Among the options being considered is an increase to the state’s 20-cent fuel tax rate.

Rep. Steve Carter, R-Baton Rouge, is working on a bill to increase the tax rate by up to 17 cents.

A bill in the Joint Committee on Transportation would raise the state’s 29.5-cent fuel rate by 7 cents to 36.5 cents. LD1149 would also increase trailer or semitrailer registrations from $18 to $28. Exam fees for CDLs would also be raised $5.

State lawmakers have battled back and forth in recent years to come up with a deal to raise revenue for infrastructure. One option under review this year would increase the state’s fuel tax rate by 10 cents. HF1899/SF1799 would raise the 28.5-cent gas and diesel rates to 38.5 cents. The change would take effect on Oct. 1, 2017.

A shortfall in the state’s highway revenue fund one year ago led to the delay of $144 million for 30 highway projects.

Gov. Steve Bullock has since called for more revenue to help get road work done. As a result, state lawmakers are looking at whether to raise the state’s 27-cent gas tax and 27.75-cent diesel tax for the first time since 1993.

HB473 would increase the tax rates by 8 cents and 7.25 cents each to reach 35 cents. The additional tax revenue would result in another $60 million annually for state and local roadways.

“This bill is intended to be a long-term fix ... to a significant funding problem in our state,” Rep. Frank Garner, R-Kalispell, said during a recent hearing on the bill.

He added that as much as 40 percent of the cost would be footed by out-of-state drivers.

“Let’s have them help pay for the infrastructure they are using.”

The bill awaits a final House floor vote. If approved, it would move to the Senate.

Gov. Mary Fallin has called for boosting fuel tax rates to get infrastructure work done.

During her State of the State address, Fallin proposed methods to help the state minimize the impact of a roughly $870 million budget hole. One option touted by the governor would be to raise tax rates to the regional state average. Specifically, the plan would raise the gas tax by 7 cents and the diesel tax by 10 cents to 24 cents each.

Various transportation funding options are on the table at the statehouse. Among the options being considered to raise new revenue is a 5-cent increase in the state’s 30-cent-per-gallon fuel tax.

HB2121 would implement the first rate increase in January 2023. The tax rate would be raised another nickel every five years.

Gov. Kate Brown has said she will make a strong push this session to get a transportation funding package through the Legislature.

South Carolina
A bill nearing completion at the statehouse would increase the state’s fuel tax rate by at least 10 cents.

Earlier this month the Republican-led House voted by a veto-proof margin to increase the state’s 16.75-cent tax by a dime. A Senate committee has since voted to raise the tax by 12 cents.

Gov. Henry McMaster was initially non-committal on how he views a fuel tax increase. In the past week the Republican governor made it clear he is opposed to raising taxes.

Officials have said something needs to be done to help the state address the estimated $1 billion annually the state Department of Transportation says is necessary to cover infrastructure needs.

H3516 awaits further consideration in the Senate. If approved there, it would move back to the House for consideration of changes before heading to the governor’s desk.

Multiple Senate committees have voted to advance an amended version of Gov. Bill Haslam’s effort to increase the state’s fuel rates.

The governor has called for raising the state’s 21.4-cent gas rate and 18.4-cent diesel rate by 7 cents and 12 cents, respectively. The taxes now provide only enough money to cover the cost of road maintenance, but not construction.

The revised bill would raise the tax rates by 6 cents and 10 cents over three years.

A provision dropped from the bill, SB1221, is the governor’s proposed indexing of the fuel rates.

A similar effort in the House was amended to remove fuel tax increases and instead relies on sales taxes for road work.

Two House bills would boost revenue for roads via collection of fuel tax on professional drivers. HB2513 would raise the state rate on diesel by 2 cents to 22 cents per gallon. HB3961 would apply the two-cent increase to gas and diesel.

Gov. Gary Herbert has signed into law a road funding bill to raise $14.6 million in additional revenue by 2020.

Previously SB276, the new law imposes automatic increases in the state’s 29.4-cent-per-gallon fuel tax. A built-in ceiling caps fuel tax rates at about 40 cents.

Taxes are estimated to increase about 0.6 cents per gallon in 2019 and 1.2 cents in 2020 by reworking the complex formula for fuel taxes approved by state lawmakers in 2015. At that time, legislators imposed a 12 percent tax on fuel once the wholesale price reaches $2.45 per gallon. Rep. Mike Schultz, R-Hooper, said during House floor discussion that fuel prices have since dropped and the state remains in need of additional revenues.

SB276 triggers a 16 percent tax on fuel once the wholesale price reaches $1.78 per gallon.

West Virginia
The Senate voted 27-6 on Saturday, March 25, to advance a bill to raise the state’s 32.2-cent fuel tax rate.

The state now collects a 20.5-cents excise rate on gas and diesel purchases. Another 11.7 cents is collected via the variable rate.

SB477 would boost the excise rate by 4.5 cents to 25 cents per gallon. The variable rate would increase by 3.5 cents to 15.2 cents.

The bill now moves to the House.

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