By Ronnie Ellis / CNHI News Service
Come July 1 Kentucky motorists will pay more for gasoline because the state tax on a gallon of gas will increase 2.4 cents to a total of 32.3 cents.
When added to the federal gasoline tax, it adds up to 50.7 cents of taxes on a gallon of gas in Kentucky.
But the co-chairmen of the General Assembly’s Interim Transportation Committee say gasoline prices really aren’t affected that much by the tax.
The tax at the pump is tied to wholesale prices and automatically rises when wholesale prices rise — although the increase is capped at 10 percent. If wholesale prices decline, so too will the tax, though again there is a statutory floor governing how far it can fall — roughly 22.5 cents.
Rep. Hubert Collins, D-Wittensville, said the formula is necessary if lawmakers and the Transportation Cabinet are to keep roads safe and in good driving condition.
When oil products increase in price, Collins pointed out, not only do gasoline prices rise but so do the oil products used in paving roads.
“If it wasn’t for this (formula), the Road Fund would never increase,” Collins said because it’s almost impossible politically to raise taxes.
His co-chairman, Sen. Ernie Harris, R-Crestwood, said state taxes don’t drive gasoline pricing anyway. Legislative staff analyses of “border-to-border” gas prices show very little variation across state borders regardless of the states’ relative tax rates.
While prices vary across regions of the state, Harris said, there is very little difference in areas on state borders with those in the neighboring state. Gas prices in Bowling Green generally match up with those in Tennessee while gas prices in Ashland roughly mirror those in Ohio and West Virginia.
“Gas prices are market driven, they’re not tax driven,” Harris said. Collins said oil companies set gas prices according to what a particular market will bear.
Tammy Branham, executive director of the Office of Budget and Fiscal Analysis for the Transportation Cabinet, said the 2.4 cents tax was already factored into budget projections for the coming year and are based on a survey of wholesale prices conducted in April.
It’s estimated to produce $72 million in additional income for the fiscal year which begins July 1. But if wholesale prices decline so will the tax. The cabinet conducts wholesale surveys each quarter and if prices decline in July, then the gas tax will fall in October.
There is also another problem for a budget based on sales of gasoline.
Greg Harkenrider, of the Governor’s Office of Budget Analysis, rising mileage standards and more electric and hybrid vehicles are decreasing the number of gallons sold.
Collins said some other states have begun assessing annual fees for electric vehicles to cover a portion of road budgets, something he said Kentucky may have to consider soon.
The Transportation Committee also heard a report on development of the Kentucky Automated Vehicle Information System (KAVIS) and they aren’t all that happy.
The system will track licensing and registration of motor vehicles and boats and was due to begin operation this year but that’s been pushed back to mid-2014. Several lawmakers expressed frustration with the delay but Harris and Collins were unhappy about a provision which was passed this spring to help track down delinquent taxpayers.
As part of a last-minute bill passed to fund changes to the state employee retirement system, KAVIS will allow the Department of Revenue to flag taxpayers who haven’t paid up and order the suspension of their drivers’ licenses or even professional licenses.
Collins asked if there might not be a grace period for taxpayer “who might not have the money today to pay their taxes?”
Tom Zawacki, commissioner of the Department of Motor Vehicle Regulation, said the Department of Finance has assured him that licenses will not be suspended or cancelled without the advance knowledge of the taxpayer and any taxpayer who works out a payment plan for delinquent taxes will not have his license cancelled.
Harris compared the provision to “the old debtor’s prison.”
“If you lose that license, you have no way to earn your income to pay your back taxes,” Harris said.
Lawmakers are also impatient with the delay in implementing the new KAVIS system because until it begins operating the state can’t implement another new law which allows license plates to stay with car owners when they trade cars or buy a new vehicle. Currently the tag goes with the vehicle.
RONNIE ELLIS writes for CNHI News Service and is based in Frankfort. Reach him at firstname.lastname@example.org. Follow CNHI News Service stories on Twitter at www.twitter.com/cnhifrankfort.