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This is the third post in our series outlining state tax trends being debated during 2015 legislative sessions.  Our previous two posts focused on tax shifts and tax cuts.

MARCH 19 UPDATE: The list of states has grown to ten now that a 6 cent increase was signed into law in South Dakota (taking effect April 1).  Utah is poised to become the eleventh state once Governor Herbert signs a bill raising the tax by 5 cents and tying it to gas prices (effective January 1)..

A little over a month ago, we identified a dozen states seriously considering raising their gas taxes in 2015 to better fund their deteriorating transportation infrastructure.  Since then, Iowa lawmakers enacted and implemented a 10-cent increase in gas and diesel tax rates, effective March 1.  Iowa’s step forward makes it the ninth state to either raise or reform its gas tax in just over two years.  Starting with Wyoming’s approval of a 10-cent gas tax hike in February 2013, we’ve seen gas tax increases or reforms enacted in jurisdictions as varied as Maryland, Massachusetts, New Hampshire, Pennsylvania, Rhode Island, Vermont, Virginia, the District of Columbia, and now Iowa.  We expect that this list will grow by the time states’ 2015 legislative sessions come to a close.

The Leaders: Aside from Iowa, these six states have made the most progress toward gas tax reforms or increases this year by passing a bill through at least one legislative chamber.

  • The Georgia House overwhelmingly approved a bill that reforms the gas tax by indexing it to rise alongside both inflation and fuel efficiency, as we’ve recommended in the past.  Now attention shifts to the Senate.
  • Michigan lawmakers have approved gasoline and sales tax increases, but we’ll have to wait until May 5 to see if voters sign off on those changes.
  • In North Carolina, the Senate passed a bill that would raise the state’s tax on wholesale gas prices from 7 to 9.9 percent.  The bill would also pare back a gas tax cut scheduled to take effect this July due to falling gas prices and would prevent further declines in the future.  The House, on the other hand, approved a less sustainable bill that would not raise the wholesale gas tax rate and would only put a temporary stop to scheduled gas tax rate cuts.  For his part, Gov. Pat McCrory is assuming the Senate’s permanent gas tax “floor” will take effect to help balance his proposed budget.
  • The South Dakota Senate approved the first bill filed this year (SB1), which raises the state’s gas tax by 2 cents per year.  The bill that the House is poised to vote on would put a stop to those increases after 3 years—effectively capping the increase at 6 cents per gallon.
  • In Utah, both the House and Senate passed gas tax legislation this week.  The Senate bill would raise the current fixed-rate gas tax by 9 cents per gallon, while the House prefers a more sustainable reform that would allow the tax to rise alongside gas prices in the future.
  • And in Washington State, the Senate approved an 11.7 cent gas tax hike, phased in over three years.

Other Developments: While the gas tax debate hasn’t advanced quite as far in these seven states as of yet, each still has a real shot at reform in 2015.

  • Discussions of a gas tax increase in Idaho are ongoing.
  • Kentucky lawmakers may not be talking about boosting the tax that drivers currently pay at the pump, but there is a lot of interest in stopping a 5.1 cent tax cut scheduled to take effect on April 1 as a result of falling gas prices.
  • Following Governor Jay Nixon’s urging that Missouri legislators consider raising the state’s 18 year old gas tax rate, at least two bills have been filed doing exactly that.
  • Nebraska’s unicameral legislature is giving serious thought to a 6-cent gas tax hike that’s being pushed by a lawmaker with a reputation for being a tax-cutting conservative.
  • Influential lawmakers in New Jersey are continuing to talk about raising the gas tax, but Gov. Chris Christie and some legislators are indicating that tax increases are off the table.  Not much has changed since our last post on the subject, but there is still talk that anti-tax politicians may change their tune if a gas tax hike on New Jersey drivers is paired with tax relief for heirs to large fortunes, in the form of repeal of the state’s estate tax.
  • South Carolina lawmakers are having ongoing discussions over plans to enact a flat gas tax hike, or to reform the tax to rise alongside inflation or gas prices.  Unfortunately, Gov. Nikki Haley is continuing to insist that any reform to the state’s severely outdated gas tax rate should be paired with an even larger cut in the state’s personal income tax—a rare progressive feature of a tax system that already tilts in favor of high-income taxpayers.  South Carolinians, however, appear to be less hung up on the idea of tying a personal income tax rate cut to gas tax reform.  As long as South Carolina’s gas prices stay lower than in neighboring states, most South Carolinians support raising the gas tax to fund infrastructure repairs.
  • Vermont is considering to a 2-cent gas tax increase that would help offset the costs associated with cleaning up roadway run-off into the state’s waterways.

The Procrastinators: The chances of gas tax reform this year have dimmed somewhat in at least two states that we initially saw as likely reformers.

  • A sizeable budget surplus in Minnesota has reduced the some lawmakers interest in raising the gas tax.  Minnesota House leadership now says that transportation needs can be met with existing revenues, at least this year.
  • Tennessee Gov. Bill Haslam thinks that gas tax reform is needed, but says that he won’t be ready to put in the effort needed to pursue that reform until next year. 

For more information on state gas taxes, take a look at the new gas tax section of ITEP’s website.