DUBUQUE, Iowa -- Several states are weighing potential changes to their gasoline taxes, encouraged by low pump prices and seeking additional revenues for infrastructure improvements.
- Iowa. Governor Terry Branstad (R) signed a fuel tax increase that would hike prices at Iowa pumps for gasoline and diesel by 10 cents per gallon, reported KCRG.
The governor said that the March 1 implementation date will mean that additional tax collections will flow into the state road use tax fund for four months of the current fiscal year. Expectations are that the increase will generate between $18 million and $20 million per month and generate $204 million in fiscal 2016.
The state gas tax would rise to 50.4 cents per gallon (CPG), giving Iowa the 13th highest in the country, according to the American Petroleum Institute. (API)
- California. The State Board of Equalization in California approved a 6-CPG cut in the state gas tax, reported the Associated Press, taking it from 36 to 30 CPG. The decrease will go into effect in July. This is part of an annual adjustment to the state gas tax that was engineered a few years back to resolve a deficit in the 2010 budget. The agency is tasked with adjusting the tax rate each year so that it generates the same amount of money as the earlier sales tax it replaced. It is predicting lower gasoline prices for 2015, so it lowered the tax pre-emptively to avoid collecting more than required.
California drivers pay the state gas tax in addition to the 18.4-CPG federal excise tax and a 2.25% sales tax.
With this 6-CPG cut, there will be an $868-million drop in funding for local infrastructure and congestion relief projects, said the California Department of Transportation.
- Illinois. As the state faces a $9 billion budget shortfall for fiscal 2016 and its current construction program funding is expiring, some in the business community are proposing ways to raise additional funding by restructuring the state gasoline tax.
According to a report in The Southern Illinoisan, documents outline one plan that would raise funding for $1.8 billion in road projects by increasing the 19-CPG gasoline tax by 13 CPG. Other options could include levying a 2% sales tax on food and drugs, raising annual vehicle registration and title fees by $20 and increasing the fee for obtaining a driver's license by $5.
To soften the blow to consumers, one proposal would slash the 6.25% sales tax on motor fuel to 1.25%.
The Illinois Petroleum Marketers Association has already come out in opposition to an increased gasoline tax, warning it could push more Illinois drivers to fuel up across the border--specifically in Missouri, where gas taxes are lower.
Gov. Bruce Rauner (R) has indicated support for restructuring the motor fuel tax for infrastructure funding, although his spokesperson said he is not currently involved in talks and has not given support to any specific plan. A spokesperson for state House Speaker Michael Madigan (D) said the congressman supports a statewide construction program because of its ability to create jobs, but wants to see which approach the governor supports before he makes any endorsements.
- Tennessee. The state legislature is unlikely to consider an increase in the state gas tax this year, according to comments this week from a key legislator. House Speaker Beth Harwell (R) told attendees at a joint conference of the Tennessee Grocers & Convenience Store Association and National Federation of Independent Business earlier this month that she does not expect the state legislature to approve an increase in the 21.4-CPG gas tax, which has not been raised since 1989, said The Times Free Press.
In January, a report from the state comptroller's office described the state gas tax as "stagnant." While not advocating an increase, the report said a 1-CPG increase would generate an extra $31 million in annual revenue, which would help address a more than $8 billion deficit in state transportation projects. The same report suggested tying the tax to inflation or the price of gas, applying the state sales tax to gasoline purchases and raising vehicle registration fees and tolls, according to a separate report in The Tennessean. Gov. Bill Haslam (R) told the paper's editorial board late last year that he expected an increase to the state gas tax would be proposed sometime in the next year.
While Harwell said she did not expect an increase to happen in 2015, legislators were open to considering ways to "broaden the base" of transportation funding to cover any shortfall due to more fuel-efficient and electric vehicles.
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