Oklahoma fuel tax increase in jeopardy?

As the state of Oklahoma prepares to increase fuel tax rates this month, legal challenges underway at the state’s highest court attempt to thwart an effort to void the tax deal.

The Oklahoma Supreme Court this week heard oral arguments in two challenges to a referendum petition to nix multiple tax hikes scheduled to take effect on June 27.

The most notable tax increase is to the state’s 17 cent-per-gallon gas tax and the 14-cent diesel rate. The tax rates have remained unchanged since 1987.

The new law increases the state tax rate for gas and diesel by 3 cents and 6 cents respectively. Both tax rates will soon be set at 20 cents.

Other increases included in the new law are higher taxes on cigarettes and some oil and gas production.

The tax increases are estimated to raise nearly $475 million annually. About one-quarter of the new revenue will come from fuel purchases.

The new revenue will help to cover a shift in available transportation revenue through the state’s general fund. The money from the state’s general fund previously routed to roads and bridges will instead be used to cover teacher pay increases.

In early May, however, a group known as Oklahoma Taxpayers Unite filed a petition to challenge the upcoming tax increases. The group is working to gain the required 42,000 signatures before July 18 to add a question to a statewide ballot.

Two education groups in the state say the petition effort is unconstitutional and misleading. Their arguments were heard on Monday, June 11, before the Oklahoma Supreme Court.

The court is expected to soon rule on the challenges.

If the petition question is allowed to move forward the tax increases could be frozen until voters weigh in – most likely this fall. A special election could also be set to settle the issue.

The state of Oklahoma collected about $430 million in fuel taxes in fiscal year 2017. The fuel tax rate increases are estimated to raise an additional $105 million per year. The revenue will be dispersed following the state’s existing formula.

Nearly two-thirds is routed to the state transportation fund for appropriation by the Oklahoma Department of Transportation. About one-third is sent to local governments for roads and bridges. A smaller amount is available for other forms of transportation.

To view other legislative activities of interest for Oklahoma, click here.