Ky. lawmakers seek to stop tax decrease

Kentuckians stand to enjoy a tax cut.

But it won’t likely come to fruition.

The state gasoline tax, currently set at 22.5 cents per gallon, will drop 4 cents on April 1, but state lawmakers are poised to freeze the tax at its current level.

The drop in wholesale gasoline prices triggered looming tax decrease because a portion of the gas tax is indexed to price. Kentucky collects a fixed 5 cents per gallon, and an additional 1.4 cents flow into a fund to repair leaky underground storage tanks. The remainder of the tax is figured based on 9 percent of the current wholesale price.

But legislators fear a drop in the tax will threaten funding for road projects. Officials estimate that the 4-cent cut would result in a revenue decrease of about $130 million, further depleting what they call an already shaky road fund.

"We're going to have to step up and do something about the 4 cents that we will lose without further action of the General Assembly," Gov. Steve Beshear, said. "The road fund is in pretty dire straits right now, and if you lose those 4 cents it would put it in a situation to where, for the foreseeable future, you wouldn't be able to even maintain roads much less build any new ones."

A vote to freeze the tax at its current level was originally scheduled for tomorrow, but lawmakers may delay the vote until next week.

House Speaker Greg Stumbo (D-Prestonsburg) supports the freeze, along with senate president David Williams (R- Burkesville), who said the tax decrease could prove “catastrophic” for state roads.

Rep. Don Pasley, (D-Winchester) also supports the freeze

"If those four pennies aren't locked in, you would be looking at a deficit situation in the Road Fund," he told the Courier-Journal. "And it wouldn't be raising the tax; the tax is already at that level."

But not all lawmakers agree. Rep. Stan Lee (R-Lexington) called the tax freeze a classic case of changing the rules in the middle of the game.

I agree with Lee. By law the tax should drop, and if the legislature votes to freeze the tax, they have functionally raised it beyond its legally prescribed limit. You can spin your way around it by saying it simply remains at the level we currently pay, but the fact remains that freezing the tax at its current level results in citizens of the Commonwealth paying more than they were legally required under the original law.

Sounds to me like a tax increase.

I also find the argument that allowing the tax to drop to its legally prescribed level will cause the state’s roads to suddenly crumble into disrepair. According to the governor, Kentucky stands to receive $421 million for road and bridge construction from the recently passed federal economic stimulus bill. That means that even with the estimated $130 million dip in revenue resulting from the drop in the tax, the states road fund will receive a net infusion of $291 million.

This is a great opportunity to functionally put some of that "stimulus" money back into the taxpayer's pockets.

Government functions like a crack addicts. It always “needs” more taxpayer money. What it currently gets never satisfies and soon it needs more to function “normally”. When it gets more, it can never go back to the prior level. At some point, it needs to suffer the pain of withdraw so it can become truly healthy.

I think this is a good place to start.

Fast facts

Federal gasoline tax – 18.4 cents per gallon.
Kentucky state gasoline tax – 22.5 cents per gallon.
Total government take – 40.9 cents per gallon.
Average oil company profit – 8 to 10 cents per gallon.
Kentucky State Dept. of Transportation budget FY 2008-2009 – $2.4 billion.
Portion of 2008-2009 budget dedicated to highways - $684,759,200