Where do things stand with a possible gas tax increase? (March edition)
Tuesday was the final day for House bills to be filed in the 2022 session and, for the first time since 2018, legislation to raise the gas tax on Kentuckians wasn’t offered.
That doesn’t mean, however, the effort to raise the gas tax is dead. Plausible scenarios exist that could bring it across the finish line before the General Assembly adjourns on April 15th.
Here’s where things stand:
Rep. Sal Santoro has filed three “shell bills” (HB557, HB652 & HB653). “Shell bills” are placeholder bills filed prior to the filing deadline that can be amended and re-titled in committee with a committee substitute. It’s unlikely Santoro uses these shell bills to run a full-blown transportation funding overhaul. There hasn’t been an appetite by the General Assembly to follow “regular order” (with committee hearings and floor votes) to raise fuel taxes on Kentuckians. However, given Santoro has championed the gas tax coalition’s agenda for years, it’s worth keeping an eye on them.
HB 8 — the House Republican’s tax reform legislation — includes provisions to levy a $0.03 excise tax per kilowatt hour on “electric vehicle power distributed in (Kentucky) by an electric vehicle power dealer for the purpose of charging electric vehicles in the state.” The bill also includes “battery mitigation fees” for electric vehicles ($140) and hybrids ($70).
The General Assembly has wrestled for years with how to account for electric vehicles and hybrids usage of state roadways. This appears to be part of that but HB 8 doesn’t include the various other registration and license fees that were major components of prior gas tax bills. Those Road Fund revenue raisers almost certainly remain in play.
HB 8’s title - An Act relating to revenue measures - positions the legislation to become a vehicle for all sorts of tax related items. A gas tax increase and the electric vehicle registration fees could get packaged with the bill’s income tax cut by the end of the session. As we’ve written before, Senate leadership signaled this possibility months ago.
It remains a tough environment for the gas tax advocates to get an immediate increase on the current rate. The current national average price of gas is $3.61 a gallon, up 26 cents from February and roughly a dollar from a year ago. (CBS News)
Which is why it isn’t surprising the Frankfort chatter has revolved around “indexing” the gas tax. Santoro’s previous bills have included a version “indexing” where - after an initial $0.10 / per gallon increase - the gas tax would be adjusted annually to account for the cost of construction inflation. (NHCCI) This approach (or any form of indexing) essentially puts future gas tax increases on automatic-pilot.
What to look for in the remaining hectic weeks of the ‘22 session?
Don’t expect a “shell bill” to become a stand-alone gas tax bill that would need to run through the normal process. With the public attention on energy prices and inflation, the statewide media would almost certainly give it prominent coverage. The committee and floor votes would be recorded and reported. The public blowback from a fully transparent process could be significant (to say the least).
Don’t expect a gas tax adjustment to be included in an amended version of HB 8 as it moves through the normal process for the same reasons stated above. The gas tax proponents know it can’t withstand public scrutiny and won’t want to reveal the issue remains in play until the last minute.
Including some “indexing” language into an HB 8 (or another bill) free conference report is the most likely scenario for raising the gas tax this session. Writing it so the indexing doesn’t kick in until a year from now would put rank-and-file members in a position of having to accept future gas tax hikes as part of a package that has the immediate reduction of the personal income tax as its centerpiece. It’s a difficult spot to put their members in but probably the only way for leadership to deliver the tax increase long-sought by powerful constituencies.
The gas tax supporters and their legislative allies know they haven’t been successful moving a stand alone bill. They also realize the issue would be so unpopular given the current environment that for the first time in five years they’ve decided against filing one.
In Frankfort, it’s never over until it’s over. Watch the various conference committees near the end of the session for the gas tax increase trying to find a home.