Texas bills call for fuel tax rate adjustment

Efforts underway in the Texas Legislature would authorize fuel tax rate increases.

The state of Texas now collects a 20-cent-per-gallon excise tax on gas and diesel purchases. According to the Texas Comptroller, the rate is unchanged since October 1991.

Doubling the excise tax

One bill from Sen. Sarah Eckhardt, D-Austin, would significantly raise the excise tax. Excise taxes are usually applied on a per-unit basis instead of as a percentage of the purchase price.

SB254 would raise the 20-cent excise rate to 40 cents for gas and diesel purchases.

The fuel tax changes would take effect on Sept. 1.

Eckhardt says that updating the gas and diesel tax is only part component of how the state should cover needed transportation revenue. Other sources she touts on her website are tolls and other user taxes “that can capture and fund increases in alternative transportation of goods, people, services and information.”

Separate option for modest rate changes

Rep. Ray Lopez, D-San Antonio, has filed a bill that would index the excise tax to the highway cost index.

Specifically, HB321 would authorize the fuel tax rate to increase or decrease each Jan. 1 based on the cost of certain highway projects.

The pursuit to adjust the tax is the second in as many sessions for Lopez. He previously pursued legislation to increase the excise tax rate on gas and diesel by 2 cents to 22 cents per gallon.

Additionally, a provision in the bill sought to index the tax to the consumer price index. The distinction would increase or decrease the tax rate by a percentage that is equal to the consumer price index percentage change for the preceding fiscal year.

Lopez has said that indexing would allow the fuel tax rate to keep pace with the rate of rising costs of highway construction and add long-term stability.

He adds that indexing would reduce the need for borrowing to get projects done.

Tax revenue for roads

The comptroller reports that the fuel tax generates an estimated $3.7 billion annually.

The excise tax is not the lone source of revenue for roads. Another $1.38 billion annually in oil and gas severance tax revenue is routed to the highway fund. The fund also receives a portion of the state’s general sales tax and motor vehicle sales tax.

Specifically, up to $2.5 billion of net revenue annually is deposited into the highway fund from the state sales tax, after total sales tax receipts exceed $28 billion. The fund also receives 35% of state vehicle tax revenue above the first $5 billion collected.

The state’s existing tax formula allots 75% to the highway fund and the other 25% is applied to the school fund.

HB321 awaits assignment to committee for the regular session that begins Jan. 10. LL

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