More states to pursue fuel tax increases in 2017

By Keith Goble, Land Line state legislative editor

Since the first of the year 11 states are collecting more tax at the fuel pump. Elected officials in at least 10 more states from South Carolina to California are discussing whether to adopt their own rate increases.

In Alabama, the Association of County Commissions is advocating for a $1.2 billion bond issue for roads in the regular session that begins Feb. 7.

The plan would use a 3-cent increase in the fuel tax to pay off the bonds.

Alabama now charges 19 cents per gallon on diesel purchases and 18 cents on gas. The tax rates have remained unchanged since 1992.

Gov. Robert Bentley has said he is in favor of a tax increase. He believes residents around the state are willing to pay extra as long as they are assured the money will be used for better roads and bridges.

Across the state line, the Mississippi Association of County Supervisors is among the groups in the months ahead that are expected to push for increasing the state’s 18.4-cent-per-gallon fuel tax for the first time in 30 years.

Officials at the state DOT have said an additional $530 million is needed in the next 15 years to address existing road and bridge needs. A penny increase in the excise tax is estimated to raise about $22 million annually.

Advocates say collecting revenue from everyone who uses the state’s roadways is the fairest option available.

Opponents, including many in the Republican-led Legislature, say a tax increase is a “no go.” Instead, they anticipate a boost in funding via the incoming Donald Trump administration.

Tennessee Gov. Bill Haslam has shown interest in raising the state’s fuel rates. The state tax rates now are 21.4 cents per gallon on gas and 18.4 cents on diesel.

The Haslam administration says state lawmakers must act to address the state’s $6 billion backlog in funding for transportation work.

Supporters add that a tax increase could help the state avoid borrowing to address infrastructure needs.

Critics say the state should first do a better job of managing existing revenues before raising gas and diesel rates for the first time since 1989.

Tennessee Transportation Commissioner John Schroer has indicated that a bill to increase fuel rates will be introduced this year at the statehouse.

Multiple bills in South Carolina would tap taxes collected at the pump to pay for road repairs. Three bills call for boosting the state’s 16-cent-per-gallon tax by seven, 10 and 12 cents. A separate bill would permit counties to raise local fuel taxes to pay for road repairs.

A Missouri state lawmaker is pushing to get a fuel tax increase enacted. Voters would get the final say.

Sen. Rob Schaaf, R-St. Joseph, is behind an effort to increase the state’s 17.3-cent-per-gallon fuel tax rate. The current tax rate has remained unchanged since 1996.

Senate Joint Resolution 3 would increase the gas tax rate by 1.5 cents and the diesel rate by 3.5 cents.

Trucking groups in the state support efforts to raise revenue for transportation work. However, they are opposed to Schaaf’s proposal calling for truckers to foot more of the responsibility to help bail the state out of its funding hole.

OOIDA Director of State Legislative Affairs Mike Matousek says the Association believes increasing the fuel tax is the most equitable way to generate additional revenue.

“Quite frankly a fuel tax increase is the only realistic option in Missouri. Any increase should be applied equally to both gasoline and diesel,” says Matousek.

A dime fuel tax increase in Indiana will also be discussed in the state General Assembly.

Senate Republicans, the chamber’s majority party, say a long-term plan will be discussed to address the estimated $1 billion needed to adequately address roads.

A legislative task force has recommended fixes that include tolls, a fuel tax increase, tying the tax rate to inflation, and abandoning collection of the fuel tax in favor of a per-mile charge.

A Louisiana transportation task force appointed by Gov. John Bel Edwards announced a list of recommendations to address roads and bridge needs.

Among the options to win approval for further consideration is a fuel tax increase. The tax rate is unchanged since 1989.

Other possibilities include indexing the fuel rate to inflation, raising registration fees, tolls, and public-private partnerships. Another option recommended by the panel is to increase registration fees for truck drivers.

Out west, the Arizona Legislature could take up for consideration plans to raise transportation revenue.

At press time, the Surface Transportation Funding Task Force is nearing the release of its recommendations for helping the state raise $60 billion for needed road projects by 2035.

A fuel tax increase is among the most likely options that will be pursued. The state’s excise tax on gas purchases is 18 cents, while the tax collected on diesel is 26 cents.

Adding a sales tax onto fuel purchases is among other options being reviewed. In addition, pursuit of a VMT tax is not off the table with ADOT reporting that vehicle miles traveled in the state having more than tripled in the past decade.

The Arizona Trucking Association told the task force that collecting revenue via the state’s fuel tax is the most equitable option to make improvements.

“The gas tax is very efficient. It is easy to administer,” testified Tony Bradley, president of the Arizona Trucking Association. I would argue it is hard to find another revenue source that has the efficiency of the gas tax.”

He added that while a VMT tax gets a lot of attention around the country “it is far from ready for prime time.”

“Let somebody else take the arrows for vehicle miles traveled.”

In bordering California, a two-bill effort would raise $6 billion annually to improve the state’s transportation infrastructure.

The state fuel tax rates are made up of an excise rate and a sales rate. After the math is worked out on both tax components, truckers and motorists pay about 39 cents a gallon.

Sen. Jim Beall, D-San Jose, and Assemblyman Jim Frazier, D-Oakley, have introduced legislation to increase the gas tax by 12 cents and raise the diesel tax by

20 cents. The tax rates would also be indexed to inflation to allow for regular increases.

In return, California’s current collection method for fuel taxes would be abandoned. No longer would the state Board of Equalization annually adjust tax rates. An increase of at least 3.5 percent in the diesel sales tax would also be applied.

“Californians from every corner of the state demand action to fix our aging roads and transportation infrastructure,” stated Senate President Pro Tem Kevin de Leon.

Montana lawmakers are considering whether to pursue a fuel tax increase. A looming shortfall in the state’s highway revenue fund has led to the delay of $144 million for 30 highway projects.

Gov. Steve Bullock said more revenue is needed to help get road work done. As a result, the state’s

27.75-cent fuel tax could be raised for the first time since 1994. LL