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With California’s Fuel Tax Signed Into Law, What Are Other States Up To?

The QuickTSI fuel tax conversation goes far back and there’s a good reason for that. Change happens almost constantly.

Have you heard? California lawmakers recently said yes to a bill that will increase gas and diesel taxes to help fund a $52 billion infrastructure spending package. What the federal government is still discussing, California is moving forward on.

Of course, this bill would have to be signed by Governor Jerry Brown. Many signs point to Governor Brown signing the bill, if for no other reason than that he spent lots of time and political capital trying to get it to pass.

The gas tax legislation set to land on the Governor’s desk got through the State Senate by the thinnest of margins, with the minimum 27 votes it needed to pass. With the bill now clearing the State Assembly on a 54-26 vote line, it is very likely to become law.

The campaign over the law had certainly been contentious, with a recall effort even initiated by a citizen seeking throw out a State Senator who voted for the law. The chances of that recall’s success are slim, but it serves as a clear example of how passionate this debate was in the Sunshine State.

And yet, you may be surprised to hear of a certain group supporting the tax increase, and that’s the California Trucking Association.

The group released a public statement, saying:

“This transportation package is a win for all Californians, including the trucking industry, which has been significantly impacted by our deteriorating roads and infrastructure. The funding options provided in this measure will give our state a prudent and reliable revenue source to fix our roads and keep goods moving in and through California.”

The California Trucking Association was more inclined to get on board when an amendment put into the bill stated that truck owners would not have to retire, replace, retrofit or repower trucks within 13 to 18 years of their model year or when the vehicle hits 800,000 miles.

The bill aims to generate another $34 billion over the next 10 years to repair bridges, highways and roads. Another $11 billion will go to improve critical trade corridors.

Specifically, SB1 would increase the excise rate on gas by 12 cents over three years. Correspondingly, the excise rate on diesel would go up by 20 cents.

California currently employs a 1.75 percent sales tax on diesel purchases. This number is set to increase by 4 percent to 5.75 percent should Governor Brown sign the bill. But as California goes, so goes the nation?

Taking the Pulse
In most cases state officials around the country are at least discussing efforts to push for a higher fuel tax to fund infrastructure improvements.

Since the federal government has not raised the nationwide tax since 1993, many of the states in question feel debating this is a matter of priority.

In addition to the decreasing influence of the static federal fuel tax, higher-higher mileage vehicles, adjustments in citizen driving habits, and increased infrastructure costs cut into state’s budget.

In just the past four years alone, 19 states have opted to either increase or revise their fuel tax collection statutes. Another 16 of some of the same states are currently discussing if they should raise the tax on fuel purchases to fund bridge upgrades.

Even the Owner-Operator Independent Drivers Association has weighed in on the issue, stating that the only way to generate the revenue to improve infrastructure was through a fuel tax increase. Mike Matousek, OOIDA director of state legislative affairs, recently stated that any increase should equally impact both diesel and gasoline. He also suggested that safeguards are put into place that will ensure the additional funding for roads and bridges can be paired bad or made only temporary.

So, what exactly is on State’s minds?

Governor Bill Walker is putting his weight behind a bill that would triple the current 8-cent-per-gallon over a two-year period. HB60/SB25 increases the gas/diesel tax beginning July 1. On July 1, 2018, another 8-cents would be added to the tax.

The Alaska Trucking Association has also come out in support of the tax hike. According to Executive Director Aves Thompson, “The Alaska Trucking Association has long supported a fuel tax increase if the funds could be dedicated to transportation needs,” he said in remarks during an open hearing Senate Transportation Committee session.

He did raise one concern, stating that delaying the second phase of the tax increase to 2019, which would allow fleets to fully incorporate the fuel tax rate increases into their rate schedules without serious headache. If not changed, Thompson stated that Phase II may hit before trucking companies have fully incorporated Phase I, thus resulting in quite a sudden bump in rate increases.

In Illinois, a house bill has been under debate that would increase the state’s 19-cent gas tax to 29 cents beginning July 1. The current 21.5-cent diesel rate would jump by a full dime, from 21.5 cents to 31.5 cents.

The funds would be broken up with 60 percent going to the state’s roads, bridges, and highways and 40 percent going straight to local governments for use according to their needs.

With the committee hearing regarding HB3136 having passed on March 28, we’ll soon see how the bill will play out once it comes up for vote.

There are several bills up for consideration in Illinois. One such would help the state address the $1.2 billion it would need to raise the current tax of 18-cents-per-gallon for gasoline and 16-cents-per gallon for diesel.

With the taxes set to be indexed annually through 2024, state lawmakers have also written in annual adjustments capped at one cent. Instead of adding the tax to quarterly filing reports, the diesel surtax would be collected at the pump.

Considering Republican lawmakers in Indiana are voicing support for HB1002 on the House floor, passage looks likely.

Infrastructure funding is just one part of a complex Kansas tax puzzle. At least three dozen road projects have been put off due to the over quarter-billion-dollar shortfall for fiscal year June 30.

To ensure transportation isn’t lost in the mix, multiple bills at the statehouse would raise the fuel tax by as much as 11 cents.

  • HB2412 and SB224 would institute a 5-cent tax increase.
  • HB2237 and HB2382 would add 11 cents to 35 on gasoline and 37 cents to diesel.

All the bills under discussion would raise tax revenues specifically outlayed for state highway funds to somewhere between 66.3 and 76.8 percent.

The situation in Montana certainly is dire. A shortfall in the highway revenue fund exactly a year ago – of which amounted to around $144 million – wound up delaying up to 30 highway projects, certainly no small number.

Since Governor Steve Bullock has made an open call for more revenue to complete badly needed infrastructure projects, state lawmakers have begun discussing ways to raise the current tax of 27 cents for gasoline and 27.75 cents for diesel. As a symbol of how difficult the issue has become, consider that he last time Montana had a debate this type it was 1993.

HB473, the bill most likely to come under consideration, would add an 8- and 7.25 cent tax to the gas and diesel taxes, respectively. The final revenue number set to go specifically to Montana’s crumbling infrastructure would amount to an additional $60 million annually.

A number of different transportation funding bills are being tossed around in the Oregon statehouse. The state currently has a 30-cent-per-gallon fuel tax and one measure wants to raise that by 5-cents.

The catch? This wouldn’t happen any time soon. HB2121 wouldn’t impose the first rate implement until January 2023, quite a long time for carriers to prepare.

With Governor Kate Brown backing the bill, and a friendly atmosphere for its passage, this one looks like a sure bet, even if the pain won’t be felt for quite some years.

Governor Bill Haslam has already attempted to raise the state’s fuel taxes on other occasions. Now, multiple State Senate committees have voted to advance on of those efforts.

The Governor called for a raise of 21.4-cent gas rate by 7 cents and 18.4-cent diesel rate by 12 cents. The revised bill under consideration would adjust those numbers to 6 and 10 cents over a three-year period.

For even more detail into how this is playing out locally in Tennessee, check out this link, where State Representative Mike Sparks – a Republican – explains his position on the bill.

Already signed into law, Utah plans to raise $14.6 million in more revenue by 2020. The law he put his signature to – SB276 – will generate automatic increases. Currently, the state sits at 29.4 cents-per-mile, though the bill has a 40-cent ceiling cap built into it.

Estimates are that taxes will see a 0.6-cent increase in 2019 and 1.2-cent increase in 2020. Once a wholesale price of $1.78 is reached, SB276 would trigger a 15 percent increase in taxes on both gasoline and diesel.

West Virginia
On March 25, West Virginia’s Senate voted raise the state’s 32.2 percent fuel tax. Currently, the state imposes a 20.5-cent excise rate on gas and diesel purchases. A variable rate will be added, which will increase the number by another 11.7 cents.

With the bill now moving on to the house, time will tell whether it passes. In all, it would boost the excise rate to 25 cents and the variable to 15.2 cents.

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