Arkansas Gov. Asa Hutchinson (R) on March 12 signed into law legislation to raise the state gas tax by 3 cents-per-gallon and diesel tax by 6 cents-per-gallon (effective Oct. 1) and add an additional levy based on the average wholesale price of fuel. Senate Bill 336 also implements an annual registration fee of $200 for electric motor vehicles and $100 for hybrid motor vehicles, and transfers $35 million annually from casino revenues to the state’s transportation fund. The measure is projected to raise an additional $95 million annually for the state department of transportation and $13 million annually for cities and counties to use on local transportation projects.
The new variable-rate formula implements a tax of 1.6 percent of the average wholesale price of gas and 2.9 percent of the average wholesale price of diesel. The tax will be adjusted annually based on the calculation of the previous year, limits the increase to no more than 0.1 cent-per-gallon per year, and prevents the tax from dropping if the 12-month average wholesale price of fuel is less than the previous year.
Gov. Hutchinson praised the transportation plan for being passed “with the broadest bipartisan support that can be imagined in funding a highway program.”
In addition, Arkansas lawmakers voted on March 7 to place a half-cent sales tax increase renewal on the 2020 ballot. House Joint Resolution 1018, originally approved in 2012, is projected to raise approximately $205 million annually for state highways and $44 million annually for localities.
Also on March 12, nearby state Alabama approved a 10 cents-per-gallon gas tax increase. Including both states, 29 states have increased or adjusted their state motor fuel taxes to support needed transportation investment since 2013. Arkansas last raised its gas tax in 1999.