Texas state lawmaker pursues fuel tax rate adjustment

If one Texas state lawmaker gets his way, the state’s fuel tax rate could be adjusted on an annual basis.

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

Change needed

Rep. Ray Lopez, D-San Antonio, has filed a bill for the 2023 regular session that would index the excise tax to the highway cost index.

The change would permit the 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 rate on gas and diesel by 2 cents to 22 cents per gallon.

Additionally, a provision in the bill sought to index the fuel 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.

The new bill from Lopez, HB321, awaits assignment to committee for the regular session that begins Jan. 10. LL

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