Higher fuel tax rates coming to Arizona?
March 3, 2020
Work continues at the Arizona statehouse to increase the state’s fuel tax rates for the first time in nearly three decades.
The House Transportation Committee voted unanimously – with three not voting – to advance a bill to raise nearly $1.6 billion per year for roads. The new revenue would come via a significant fuel tax increase and new fees on alternative fuel vehicles.
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 Noel Campbell, R-Prescott, HB2899 would raise fuel tax rates by 18 cents.
Gas and diesel fuel tax rates would increase by 6 cents annually each of the next three years. When fully implemented, the gas rate would reach 36 cents and the diesel fuel tax rate would be 44 cents.
Additionally, the rates would be indexed to allow for regular increases.
Campbell has said the rate increases would ensure that everyone is paying their fair share of ongoing maintenance of the state’s transportation system. He adds that the state is nearly $1 billion per year behind in transportation obligations.
“I believe this bill is absolutely essential for the state of Arizona. Without the revenue to be generated for our roads, bridges and infrastructure this state will lose ground economically,” Campbell said during committee discussion on the bill. “Plus, it will lose ground in safety ways.”
“The whole purpose of this bill is to find a permanent funding source for transportation. If we can pass this bill in its entirety, we should not have to revisit this thing again. The bill is comprehensive.”
Rep. David Cook, R-Globe, was one of three Republican lawmakers on the committee not to vote on the bill. He highlighted the federal government’s role for the state’s current transportation funding situation.
“When is the federal government – and the responsibility they have for commerce, that they have for trucking, and that they have for industry – going to step up and raise the federal gas tax?” Cook asked.
He said he would prefer the Legislature move forward with smaller fuel tax increase amounts.
Alternative fuel vehicles to pay up
Campbell has pointed out that alternative fuel vehicles are not paying “their fair share” for using Arizona roads.
In an effort to change that distinction, the bill subjects electric and hybrid vehicles to a road use fee.
The fee for electric vehicles would start at $111. The rate would be increased to $166 over three years. Hybrid vehicle fees would start at $45 and increase to $67 over the same time.
After 2023, the fees would be adjusted to inflation.
New highway account
Revenue raised via the transportation funding bill would be deposited into a new account. The Arizona Road Use Account would earmark new revenue specifically for road maintenance and construction.
Arizona law now allows a portion of taxes and fees to be used for law enforcement purposes.
The road ahead for Arizona
HB2899 awaits consideration on the House floor. If approved there, it would head to the Senate.
The likelihood of a tax increase being enacted into law in the coming months 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.
The Republican governor has said the state has plenty of money to get work done on projects that include widening a stretch of Interstate 17 between Anthem and Sunset Point. He cites a nearly $1 billion state surplus.
Any measure vetoed by the governor would need a three-fourths vote of each chamber for a veto override.
Campbell had pointed words for elected officials not willing to get behind the tax changes.
“We know what needs to be done in this state. What we lack is the leadership to do it,” Campbell said. “That’s what has to happen. If it doesn’t happen, this state is not going to make progress.”