Wyoming legislative panel backs off diesel tax increase

An interim Wyoming legislative panel has backed away from a possible diesel tax increase and will instead go back to the drawing board to address transportation funding needs.

Wyoming’s current tax rate of 24 cents per gallon is unchanged since 2013. At that time, the 14-cent gas and diesel tax rates were increased by 10 cents.

Diesel tax increase proposal

The Joint Transportation, Highways and Military Affairs Committee met recently to discuss two bill drafts to boost transportation funding.

The Wyoming Department of Transportation told the panel the state has a $400 million annual transportation funding shortfall.

In an effort to help address the funding gap, committee members discussed one plan to increase the state’s diesel tax by 4 cents per gallon. To help counter additional costs for Wyoming-based truckers, the plan included a decrease in state vehicle registration fees.

Sen. Brian Boner, R-Douglas, told committee members the goal of the bill draft is to create a “net-zero effect” for Wyoming truck drivers.

“If we reduce registration fees, increase fuel tax, then we might see a net gain to WYDOT,” Boner said.

Wyoming Trucking Association President Sheila Foertsch has communicated to the panel her group supports a fuel tax increase at the same level for gas and diesel.

“We don’t support a diesel-only bill,” Foertsch reiterated during the recent hearing. “We don’t support diversion of revenue currently going to the Department of Transportation’s highway fund, and this bill does that.”

A Wyoming Legislative Service Office analysis pointed out that all vehicle registration fees are sent to the state highway fund. Diesel fuel taxes, however, do not go solely to the highway fund.

The state highway fund collects 75% of tax revenue. Counties collect 25% and cities and towns receive the other 5%.

Dennis Byrne, chief financial officer for WYDOT, told lawmakers the proposal would result in a negative revenue impact totaling $17 million. Simply to break even, he added that the diesel tax would need to be increased by about 11 cents. Committee members responded by declining to advance the plan.

Fuel tax increase for all

The panel also declined to advance a second bill draft to increase the state fuel tax rate on gas and diesel by 2 cents. The draft included a $20 reduction in vehicle registration fees for all vehicles.

Byrne said the proposal would result in a negative revenue impact totaling $6 million. To break even with a $20 reduction in registration fees, the state would need to increase the gas and diesel tax rate by 4 cents.

Instead, Byrne recommended legislators increase taxes that could include the severance tax, federal mineral royalties or sales tax.

Fifth round

The recent pursuit in the interim transportation committee marks the fifth time in recent years that lawmakers considered a proposal to raise road revenue via an excise tax increase.

In 2022, state lawmakers voted not to consider a bill to raise the excise tax on gas and diesel by 15 cents over three years to 39 cents.

One year earlier, the House Transportation Committee voted to advance a bill to tap the funding source to enhance support for state and local road work.

The bill called for increasing the 24-cent tax on gas and diesel by 9 cents to 33 cents per gallon over three years. The tax on alternative fuels would have been raised by the same amount. The legislation did not receive a House floor vote, effectively killing it for the year.

Will there be a sixth round?

Although the transportation panel declined to continue pursuit of either proposed funding plan, the issue is far from over.

Boner told legislators there would be continued conversation during the 2024 budget session as they look for ways to “fill the gap” for transportation funding. LL

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