Extras on Excise: Status of State Gas Tax Reform in Limbo Due to Election Year And Other Concerns


As April draws to an end, it feels like an appropriate time to revisit and assess the status of those proposed gas tax reforms that captured our attention in 2013 and early this year (or captured at least some of our attentions). Indeed, after an exceptionally active 2013, states hit the ground running in 2014. But as some may have expected, the legislative (and political) process that is required for all policy changes has left the status of most of those reforms in neutral or, in some cases, the graveyard.

Over the past few decades, many states’ transportation infrastructures have been in a state of erosion and during that period of time, their respective gas taxes, for the most part, have remained stagnant. Accordingly, this led to an imbalance between rising road maintenance costs and available revenue to address such deterioration. In 2013, many states reached a tipping point and tackled their depleted transportation funds by identifying the gas tax as a resource for injecting much needed revenue into their infrastructures.

While most proposed 2014 reforms have, to date, been unsuccessful, last week New Hampshire legislators passed S.B. 367, which will increase the gas tax from $0.18 to $0.222 effective July 1. In response to the bill’s passage, Gov. Maggie Hassan (D) remarked that she “look[s] forward to signing this bipartisan legislation into law so we can keep New Hampshire’s economy moving forward by advancing critical road and bridge projects and finishing the long-overdue expansion of I-93.”

However, thus far, New Hampshire appears to be the outlier. In January, Delaware Gov. Jack Markell (D) proposed raising the state’s motor fuel tax by $0.10 and indexing it to inflation. The legislation is currently at a political stalemate with uncertainty surrounding its future in this election year.

Kentucky introduced H.B. 22 to eliminate automatic rate adjustments by placing such authority in the hands of the General Assembly. To date, H.B. 22 is in a similar holding pattern. Iowa’s gas tax reform is also stuck in limbo and with adjournment approaching, passage remains doubtful. 

New Mexico’s legislation, on the other hand, had its “action postponed indefinitely,” which is a polite way of saying it did not survive the committee stage.

Minnesota, Utah, and Washington, however, all have bills that are moving their way through the committee process. Indeed, Minnesota S.F. 2107/H.F. 2395 proposes a 5 percent gross receipts tax that would be linked to the average price of gasoline and would complement the current gas excise tax. The legislation is currently in the Finance and Commerce Committee and, according to reports, faces stiff resistance. 

Similarly, Washington S.B. 677 proposes a gasoline tax increase of $0.115 a gallon over three years. The bill is currently in the Transportation Subcommittee and, according to some reports, legislators are optimistic on its ultimate passage.  In addition,Utah S.B. 60 proposes annual gas tax increases, with a $0.245 floor, which are indexed to the price of gasoline. S.B. 60 is currently filed in the Senate where the House version is awaiting passage.

North Carolina passed gas tax reform in 2013. This year, there is speculation that the state could add a vehicle mileage tax in addition to its current $0.375 per gallon tax.

As 2014 proceeds, states will continue to debate the merits of gas tax reform. The fact that it is an election year makes legislators cautious of voting in favor of any tax increases. But as transportation infrastructures continue to crumble from underneath us, reluctant legislators will need to find alternative and creative solutions to address the widening gap between a deteriorating infrastructure and insufficient transportation funds.

Continue the discussion on the BBNA State Tax Group’s LinkedIn page: Will the rest of 2014 mirror the activity we witnessed in 2013?

The following chart provides a non-exhaustive look at state gas tax developments from 2013 through April 2014.

STATE                                                                   YEAR                                                     DEVELOPMENT

California

2013

California Board of Equalization voted 3-2 to raise the excise tax rate for gasoline from $0.36 to $0.395 per gallon in 2013.

Connecticut

2013-14

On Jan. 30, Gov. Dannel Malloy (D) announced a plan under which the state’s $505 million projected surplus will fund refund checks for sales and gas tax for taxpayers meeting certain income requirements.  In addition, a 2005-scheduled increase to the state’s gross receipts tax on gasoline raised the gas tax by $0.043 in 2013.

Delaware

2014

On Jan. 29, Gov. Jack Markell (D) proposed raising the motor fuel tax by $0.10 per gallon and indexing it to inflation.

District of Columbia

2013

2013 legislation implemented a gasoline tax equal to 8 percent of the average wholesale price per gallon, subject to adjustment twice a year.

Iowa

2014

On Jan. 29, House Study Bill 514 passed the House Transportation Committee. The bill would raise the state’s gas tax by $0.10 per gallon over three years. 

Kentucky

2014

H.B. 22 has been introduced to grant the General Assembly sole authority to adjust the state’s “average wholesale price” of gasoline. 

Maryland

2013

2013 legislation replaced flat general excise tax rate with a rate indexed to inflation. New law further imposed 1 percent sales and use tax equivalent rate on motor fuel, with potential increase to 5 percent by fiscal 2017.

Massachusetts

2013

2013 legislation linked the gas tax rate to inflation. Rate increased from $0.21 to $0.24 per gallon.

Minnesota

2013-14

In 2013, the state Senate approved a $0.05 gas tax increase that never came to a vote in the House.  In 2014, S.F. 2107/H.F. 2395 was introduced. The legislation proposes a 5 percent gross receipts tax on gas which would be indexed to gas prices and would be in addition to the current excise gas tax.

Mississippi

2014

On Jan. 6, Lt. Gov. Tate Reeves (R) stated that an increased gas tax would be a “nonstarter” in the state Senate.

New Hampshire

2014

S.B. 367 passed legislature. Bill increases gas tax from $0.18 to $0.222 effective July 1. Gov. Hassan (D) is expected to sign bill in the near future.

New Mexico

2014

H.B. 74 introduced to raise gasoline and diesel fuel tax rate from $0.17 to $0.22 per gallon through June 30, 2024, and then revert back to $0.17. Bill did not make it out of the committee stage.

North Carolina

2013

2013 legislation implemented a $0.375 per gallon cap on the gas tax through June 30, 2015. In 2014, there are reports that the state could introduce an additional vehicle mileage tax.

Oregon

2013

2013 legislation established the nation’s first vehicle miles tax as an alternative method of generating fuel tax from specific vehicles. Beginning July 1, 2015, the Oregon Department of Transportation is authorized to set up a mileage collection system for 5,000 volunteer drivers in which they may charge $0.015 per mile driven and issue a gas tax refund to those participants.

Pennsylvania

2013

Effective Jan. 1, legislation eliminated flat rate gas tax and increased oil company franchise tax’s $1.25 cap on average wholesale price of gasoline and diesel to $1.87. The amount will be raised to $2.49 a year later and eliminated in 2017, when a $2.99 price floor will be established. As a result, tax on gasoline increased from $0.312 to $0.407 and from $0.381 to $0.510 on diesel fuel.

South Carolina

2014

In her Jan. 22 State of the State address, Gov. Nikki Haley (R) stated that raising the gas tax “is not an option . . . [and she] will veto any bill that reaches [her] desk that raises taxes on gasoline.”

Utah

2014

S.B. 60 introduced. Legislation proposes annual increases, indexed to the price of gasoline, with a $0.245 floor.

Vermont

2013

2013 legislation imposed new 2 percent assessment fee based on tax-adjusted retail price of gasoline. New law raised gas tax rate by $0.059 per gallon.

Virginia

2013

2013 legislation eliminated fixed tax rate and introduced tax based on gas prices. Under new law, gas rate is subject to adjustment twice a year and is equal to 3.5 percent average wholesale price of gasoline and 6 percent wholesale price of diesel fuel.

Washington

2013-14

2013 legislation provided funding to Washington State Transportation Commission to examine feasibility of transitioning from the current motor vehicle tax to a road usage charge. In 2014, S.B. 677 introduced. Legislation proposes an increase of $0.115 a gallon over three years.

Wyoming

2013

2013 legislation increased gas tax rate by $0.10 from $0.13 to $0.23 per gallon.

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