Legislation mandating Arkansans pay more at the gas pump easily passed out of the Senate Revenue and Tax committee on Wednesday (Feb. 20). SB336 by Senator Terry Rice (R – Waldron) would create a new tax at the wholesale level on gas and diesel. With a formula based on the price of gas, it would result in about a 14% increase per gallon in the first year for gas and a 24% increase for diesel. The new tax is formulated to increase each year but would be capped at 1/10th of one cent per gallon. If gas prices fall, the previous year’s rate would be used. In the first full year of implementation it is estimated to bring in over $86 million in new taxes and fees for road maintenance and repair.
The legislation would create new registration fees of $100 for a hybrid vehicle and $200 for an electric car raising around $2 million per year in new revenue. Several representatives of the Sierra Club spoke against this provision of the law, calling it unfair, punitive, and against the people who are trying to improve the environment by driving fuel efficient vehicles.
Several questions by committee Chairman Jonathan Dismang (R – Beebe) highlighted how the use of general revenues and revenue from casino gaming would be used to fund roads. There is a guaranteed $35 million per year dedicated to highways under the bill, pulling from casino gambling revenue. If casino gaming revenue does not equal the $35 million, then the remaining would be pulled from general revenues such as the restricted reserve fund or other funds the Governor chooses.
According to Paul Gehring with the Arkansas Department of Finance and Administration (DFA), it is estimated that casino gaming would bring in $22.5 million by fiscal year 2028 that could be put towards that $35 million guaranteed number. These estimates are based on only three casinos operating in Arkansas, rather than the four approved by the people of Arkansas in the November 2018 general election. A casino in Pope County seems unlikely at this time as newly elected officials for Pope County Judge and Russellville’s Mayor were elected by opposing the casino proposal. A casino requires letters of local support from one of these elected officials before being approved for a license.
Randy Zook of the Arkansas State Chamber of Commerce spoke in favor of the legislation and promised to also support the proposed constitutional amendment that would extend a half cent sales tax increase that is currently set to expire. That proposed amendment (HJR1018) will be heard separately from the gas tax increase bill. The amendment is estimated to raise taxes by nearly $300 million for the state, cities, and counties in addition to the over $100 million from SB336 earmarked for roads.
Rice stated that the Governor’s highway plan was “substantial, prudent, and long-term” when presenting the bill. The legislation passed on a voice vote with Senator Trent Garner (R – El Dorado) the only audible no vote. Garner opposed the bill due to the tax increase but supported use of general revenue for roads.
The bill will now go to the full Senate Floor where a majority of the Senators are co-sponsors of the legislation.