Gas tax bill

LOUISVILLE, Ky. (WDRB) – A bill introduced in the state legislature Tuesday would raise Kentucky’s gas tax and add other fees in a bid to increase transportation funding.

House Bill 561 also looks to change 20th century formulas that determine how state road fund dollars are sent to cities and counties, a switch advocates say would modernize Kentucky law and benefit fast-growing cities.

The measure was filed on the 16th legislative day of the 30-day session that ends March 30 – and the final day for new bills. It’s the fourth straight year such a bill has been filed.

Rep. Sal Santoro (R-Florence) once again is pushing to raise the state’s gas tax from 26 to 36 cents per gallon and adjusting it annually based on changes to the National Highway Construction Cost Index.

His bill also would assess higher taxes on tractor trailers and other heavy vehicles and create new fees for electric car owners, while nearly doubling the cost to register cars and pickup trucks each year, to $22. Annual motorcycle renewals also would climb, from $9 to $15.

Drivers of electric cars would pay a $150 fee each year that’s tied to changes in the national construction index. And the cost of getting and renewing many specialty license plates would increase.  

The bill is the top priority of the Kentucky Chamber of Commerce, but other powerful interest groups also support an increased gas tax. Among them: The Kentucky League of Cities, the Kentucky Association of Counties and a Kentucky Chamber-led coalition of 25 industry and business groups, including UPS and Greater Louisville Inc., the metro area’s chamber.

A fiscal note showing how much a higher gas tax and other fees would generate has not yet been posted online, but a similar bill filed in 2020 would have created an additional $387 million in its first year, estimates show.

Kentucky Chamber’s president and CEO Ashli Watts said in a statement Tuesday that lawmakers ought to pass Santoro’s bill to “continue our economic recovery and promote safety and better economic recovery” in the state.

“Our neighboring states have acted in recent years, and it is imperative to increase our commitment to transportation in 2021 to ensure Kentucky stays competitive,” she said.

Six of Kentucky’s seven neighboring states have raised their gas taxes in recent years; Missouri lawmakers voted for an increase in 2018, but voters turned it back.

Opponents of raising the tax say Kentucky needs to better manage its existing collections and end the practice of letting some monies be used elsewhere.

Kentucky diverts nearly 11 percent of its gas tax revenue, the Reason Foundation found in a report issued last year that analyzed spending during the 2018 fiscal year. That amounted to $83.3 million of $764.9 million in tax revenue.

The state’s 26-cents-per-gallon fuel tax makes up the largest share of Kentucky’s road construction fund, which gets 24.6 cents for each gallon pumped. The remaining 1.4 cents goes toward cleaning up underground fuel storage tanks.

The tax, which is linked to wholesale fuel prices, has remained at 26 cents per gallon since 2015, when lawmakers approved that amount as a “floor” that can’t go any lower even if gas prices fall. That measure was in response to plummeting tax collections as a result of lower wholesale prices.

Kentucky’s road fund has been strained in recent years by fuel-efficient vehicles that use less gas. The emergence of electric and hybrid cars also is a small but growing factor.

Even with modest growth, Kentucky’s gas tax revenues have failed to keep pace with inflation. Meanwhile, changes in travel and driving during the coronavirus pandemic have lowered revenues further.

Fuel taxes brought in $740.8 million during the most recent fiscal year, down roughly $31.5 million from the same period in 2019. That was the lowest collection since at least 2009 when adjusted for inflation, according to a WDRB News analysis.

The road fund itself also dipped, to $1.49 million during the most recent fiscal year, the lowest inflation-adjusted level since 2010.

This story may be updated.

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