LINCOLN -- At the same time pump prices are rising, state lawmakers have decided that fuel taxes should increase.
The Legislature gave first-round approval to a spending bill and new method of taxing fuel on Wednesday. Combined with another spending increase already approved for the Department of Roads earlier this session, the measures could hike the price of fuel by 4 cents per gallon.
Supporters say the increase is needed to help build and maintain roads now in jeopardy because current fuel-tax revenue is expected to remain flat and hasn’t kept up with inflation.
“If we continue the status quo, we’re going to fall further behind,” said Sen. Deb Fischer of Valentine, the main sponsor of the bill (LB846).
“I’d say we’ve reached a crisis,” she said later.
But some lawmakers questioned the wisdom of hiking fuel taxes at a time when the economy is faltering and gas prices are reaching near-record levels. Not counting the spending increase approved previously approved by the Legislature, the measures voted on Wednesday could increase the fuel tax by 3.3 cents per gallon.
If approved, the increases would go into effect this summer and early next year.
“Many of our citizens are hard-pressed to pay more,” said Sen. Dave Pankonin of Louisville. “This is not the time to pile on additional taxes.”
One estimate from the state shows a $190 million shortfall for road construction by the end of the decade because of flat fuel-tax revenue and inflation.
Under the measure given first-round approval Wednesday, there would be a new 5 percent tax on the wholesale price of fuel, collected when the fuel is sold to retail stations.
Currently, there is a per-gallon tax that is only based on how much fuel is sold, not the price. The bill would maintain the fixed portion of the tax but reduce it by 8 cents per gallon.
But it would not change what is known as the variable portion of the current per-gallon tax. It fluctuates to ensure the state collects no more, and no less, for roads than what has been budgeted.
Despite the decrease in the fixed tax proposed in the bill, the wholesale tax would create a larger overall revenue stream for the state. But lawmakers would still be able to decide whether to tap the larger pool of dollars and increase the overall fuel tax.
That’s because the overall tax rate is determined by how much money the Legislature budgets for the Department of Roads. Even with the wholesale tax, they could choose, for example, not to approve budget hikes for the department. Doing so would trigger a decrease in the variable tax that would offset the wholesale tax.
“If we don’t increase the budget to take advantage (of the wholesale tax), the variable will decrease,” Fischer said. “It doesn’t automatically bring in more. We still set the budget. If the political will is there to take advantage of that revenue, the (Department of Roads) will benefit.”
Lawmakers had the political will Wednesday, voting to increase the department’s budget by about $16 million next year.
Estimates from state officials show that the wholesale tax could increase revenue by $52 million for road construction in two years.
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