Fuel tax rate changes pursued in seven states

In statehouses all over the map, legislators hope to implement changes in fuel tax collections.

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

Arizona

Pursuit underway at the Arizona statehouse would increase the state’s fuel tax rates for the first time in three decades.

Arizona now charges 18 cents per gallon on gas purchases and 26 cents on diesel purchases. Unchanged since 1991 and 1993, the tax rates raise about $750 million annually.

Sponsored by House Transportation Chairman Frank Carroll, R-Sun City West, HB2436 would implement an inflation adjustment for fuel tax rates. The law would take effect in July 2022.

The legislation comes one year after the Legislature failed to approve a bill to increase gas and diesel rates by 6 cents annually over three years. Additionally, the failed bill called for rates to be indexed to allow for regular increases.

Carroll’s bill awaits assignment to committee.

The likelihood of a tax increase soon being enacted into law is cloudy. A two-thirds vote in both statehouse chambers is required to advance a tax change to the governor’s desk. Gov. Doug Ducey, however, has indicated he is opposed to a tax increase.

Indiana

One Indiana state lawmaker wants to freeze fuel tax rates.

A 2017 state law increased the gas and diesel rates by a dime. The 11-cent surcharge tax on diesel also increased by 10 cents and started being collected at the pump instead of being collected quarterly through tax filing reports. In addition, tax rates were set to be indexed on an annual basis through 2024.

As a result, the gas and diesel rates now are set at 31 cents and 51 cents per gallon.

Rep. John Jacob, R-Indianapolis, has introduced a bill to eliminate the annual index factor for the rates beginning July 1.

Specifically, HB1518 would revert the gas and diesel taxes to the rates in effect June 30, 2020. As a result, the gas tax would be set at 30 cents per gallon and diesel would be 49 cents.

A fiscal impact statement attached to the bill shows the estimated revenue losses to the state highway fund and the motor carrier fund would total between $131 million and $159 million annually by fiscal year 2025.

The bill is in the House Roads and Transportation Committee.

Mississippi

Two bills in the Mississippi House would raise revenue via fuel tax rate increases.

The state’s current fuel excise tax is 18 cents. It is unchanged since 1987.

The first bill would raise the gas tax rate by 8 cents to 26 cents. The increases would be implemented in 2-cent increments over four years.

The diesel rate would be increased by 12 cents to 30 cents over the same time. The increases would be implemented in 3-cent increments.

Sponsored by Rep. Charles Busby, R-Pascagoula, HB574 awaits consideration in the House Ways and Means Committee.

The second bill would apply solely to Marion County.

HB947 would allow voters in the locale west of Hattiesburg along the Louisiana line to decide whether to impose a local tax on gas and diesel sales up to 5 cents per gallon.

Revenue would be dedicated for local roads, streets and bridges.

Missouri

Efforts underway at the Missouri statehouse are touted as an aid to address long-term funding to complete road and bridge work. The state’s 17-cent fuel tax rate has remained unchanged since the mid-1990s.

The Missouri Department of Transportation has said there is an $825 million gap in annual road and bridge funding. Transportation officials say a dire situation to fund road and bridge work will only worsen until legislators get a deal done.

Senate President Dave Schatz, R-Sullivan, is behind legislation to raise the gas and diesel rate by 10 cents to 27 cents per gallon.

The increase would be phased in over five years. Starting Jan. 1, 2022, the tax would be increased by 2 cents annually through Jan. 1, 2026.

Voters would make the final decision on the issue in a statewide referendum.

There is no indexing component in the bill – SB262.

Two House bills, HB114 and HB694, call for the same rate increases.

A proposed amendment to the state’s constitution has also been introduced by Schatz. Passage of SJR21 would formally put the tax question on ballots throughout the state.

All measures await assignment to committee.

North Dakota

A bill in the North Dakota House would increase the state’s fuel tax rate to boost transportation funding.

The state now collects 23 cents per gallon on diesel and gas sold.

Sponsored by Rep. Vicky Steiner, R-Dickinson, HB1464 would increase the excise rate by 4 cents over two years to total 27 cents per gallon. The rate increases would be implemented the first of July 2021 and 2022.

The bill is in the House Finance and Taxation Committee.

Washington

Washington House Democrats were the state’s first caucus for the 2021 legislative year to propose a transportation package.

The chamber’s majority party has announced plans to pursue an increase of the state’s 49.4-cent fuel tax rate.

The 16-year, $26 billion funding package includes an 18-cent increase in the gas tax rate. The tax would be raised by 10 cents this year and another 8 cents in 2022.

The diesel rate would be increased by the same amount with an additional 3-cent boost.

Tax rates would also be tied to inflation allowing for annual increases.

“Our proposal is much more substantial than any in state history because the needs and challenges are so much bigger,” House Transportation Chairman Jake Fey, D-Tacoma, said during a news conference detailing the plan.

A 67.4-cent gas rate and a 70.4-cent diesel rate are projected to raise about $1 billion annually.

If approved, the state’s gas tax rate would surpass Pennsylvania’s 57.6-cent rate as the highest in the nation. The diesel tax would be second nationally only to the Keystone State’s 74.1-cent rate.

Additionally, the House Democratic package would include a new carbon fee.

The fee has been described as an aggressive policy to combat climate change that charges polluters for the right to emit carbon dioxide and other greenhouse gases.

The carbon fee would start at $15 a metric ton of carbon. It is estimated the levy would add about 14 cents to each gallon of fuel. The fee would increase by $5 per ton of carbon emission in 2023 and again in 2025 to total $25 per metric ton.

Also include is a $10 fee increase on truck license fees by weight and a $25 fee increase for IFTA decals.

About two-thirds of all revenue raised would be allotted for highway related work. Most of the balance would be applied for carbon reduction initiatives.

The Legislature’s other caucuses are expected to introduce their own plans.

Wyoming

The state’s current tax rate of 24 cents per gallon is unchanged since 2013. At that time, the tax rate was increased by 10 cents.

The Joint Revenue Interim Committee has introduced a bill to tap the existing funding source to enhance support for state and local road projects. Specifically, the legislation would increase the tax on gas and diesel by 9 cents to 33 cents per gallon. The tax on alternative fuels would be raised by the same amount.

Each penny increase is estimated to raise $6.7 million yearly.

The Wyoming Department of Transportation reports $135.6 million in unfunded operating expenses. The amount includes $72.3 million in construction and maintenance.

The bill, HB26, would raise an estimated $60.3 million annually for state and local roads, according to information provided by the agency.

A fiscal note attached to the bill shows that the state’s highway fund would collect about $40.2 million. Another $14.1 million would be allotted to county roads, while cities and towns would get $5.9 million. The remaining $1.2 million would be set aside for state parks. LL

More state trends

Keith Goble, state legislative editor for Land Line Media, keeps track of many trends among statehouses across the U.S. Here are some recent articles by him.

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