Two states with variable-rate gas taxes have reached deals to prevent the taxes—both based on the average wholesale price of gasoline, which has decreased significantly in the past few months—from collecting below an amount needed to maintain the states’ transportation infrastructure.
Kentucky approved on March 25 modifications to the state’s variable-rate gas tax, determined quarterly as 9 percent of the average wholesale price of gasoline, in order to prevent the tax from dropping to 22.5 cents-per-gallon on April 1. House Bill 299 will raise the floor on the gas tax so it cannot collect less than 26 cents-per-gallon. The bill also adjusts evaluation to an annual basis, and restricts the tax from increasing or decreasing more than 10 percent per year.
Additionally, North Carolina legislators on March 26 are reported to have reached a compromise to prevent the state gas tax from decreasing dramatically. The reduction scheduled for April 1 would have likely dropped the amount collected by the tax to below 30 cents-per-gallon, which would have cost the North Carolina Department of Transportation hundreds of jobs and an estimated $400 million in funding.
In the reported deal, the state gas tax would decrease 1.5 cents-per-gallon on April 1, another 1 cent January 2016, and an additional 1 cent July 2016. This would bring the state gas tax to 34 cents-per-gallon until the end of the year. Starting in January 2017, the state gas tax would be calculated based on changes in both the national Consumer Price Index (making up 25 percent of the new tax) and in the state population (making up 75 percent of the tax). This new formula would replace the state’s current variable-rate tax.
The compromise, Senate Bill 20, is on the calendar for consideration in both houses of the legislature March 30.