The Myth of Kentucky's Gas Tax Crisis

No doubt you've heard the wailing and seen the hand-ringing about Kentucky's gas tax dropping due to the lower gas prices we are seeing. My home Fiscal Court (Scott County) voted 7-1 to pass a resolution asking the State legislature to 'stabilize' the road fund, though the resolution failed to indicate how it expected the legislature to accomplish this. The resolution, no doubt provided by those with an interest in growing the Transportation department budget, avoided any discussion of the real facts about the gas tax.

            In 2009, the legislature decided to tie the tax, in part, to the wholesale price of gasoline. Of course, when they did this they carefully crafted it so it would guarantee an increase from the 18.5 cents per gallon being levied at that time, to about 22 cents, the floor the tax cannot go below.  The upside was the price of gas was on the rise, and with no upper limit, and only a restriction to increase no more than 10% a year, the tax began to skyrocket, reaching more than 32 cents in 2014. This 'instability' was just what the Transportation folks wanted, as long as the price of gas was up, but once it began to fall, the formula just wasn't good enough, and they began claiming some calamity will befall us all. After all, they never anticipated gas would drop this much and never imagined the tax would hit the floor of 22 cents. It hasn't! It is still 26.4 cents today.

           

The formula for this tax is 6.4 cents plus 9% of the wholesale price of gas. Since there is a lag determining the average wholesale price of gas each quarter, we may still see a drop in April, but as prices have already began a climb, there is little doubt it won't stay there long.

            One question I have heard many times is what did they do with the huge increases in money they took in the last five years. It certainly wasn't all spent on roads. They certainly didn't address the problems on many, many State roads. One look at the re-designs in many towns throughout Kentucky and you'll begin to see the type of nonsense they have found to spend it on. The only bills on the table in the legislature so far are to increase the floor from 22 cents to 27 cents but, of course, there will not be a ceiling. The Transportation dept has indicated repeatedly they would like to see a return to 32 cents plus as soon as possible. This is exactly what they mean when they talk of stabilizing the road fund. An increase from 18.5 to 32 cents in six years, or a 72% increase in the tax you pay per gallon!

            We already pay a higher tax per gallon than almost every state around us. At a time when we need  to be as aggressive as possible to attract new business investment, we do not need to number in amount of tax levied.

            The Transportation Department has already used the threat of reduced County road funds to persuade many of those in County governments across the State to lobby for this increase. It's time to return to a flat tax rate. The road fund does not need to be tied to a constantly fluctuating wholesale price. I challenge our Governor candidates and Senator Damon Thayer to propose a 25 cents per gallon flat tax. It's more than the current floor, less than the current rate, ends the instability just as many County Fiscal Courts have requested. It's a win-win.

            Your input can really make the difference here. Call your legislators and let them know where you stand. Just call the legislative hotline, 1-800-372-7181, and ask them to give your Senator and your State representative your message.

Mike Bradley

mikeinsg@roadrunner.com