For many years, the state sources that provide the most funding for transportation programs have been motor fuels taxes, sales tax, and registration fees. This article provides information regarding Kansas motor fuels taxes and fuel use.
Per Gallon Motor Fuel Taxes
Kansas’ motor fuel taxes are 24¢ per gallon on gasoline and 26¢ per gallon on diesel fuel, unchanged since 2003. The table below lists the effective dates of tax increases for motor fuels. The increases in 1989 through 1992 were part of the Comprehensive Highway Plan as it was enacted in 1989, and those in 1999 and 2001 were part of the Comprehensive Transportation Program enacted in 1999. No increases in fuel taxes are associated with the Transportation Works for Kansas (T-Works) program enacted in 2010 or the Eisenhower Legacy Transportation Program (also referred to as IKE) enacted in 2020.
Motor Fuels Tax Rates Changes—1925-2020
A tax of 17¢ per gallon was imposed on E85 fuels beginning in 2006. Certain fuel purchases, including purchases of aviation fuel and fuel used for non-highway purposes, are exempt from fuel tax.
Federal fuel taxes of 18.4¢ per gallon for gasoline, gasohol, and special fuels and 24.4¢ per gallon for diesel fuel also are included in fuel prices. The amount of federal tax per gallon has not increased since 1993, although increases have been proposed in Congress. As of July 1, 2020, combined state, local, and federal gasoline taxes across the country averaged 54.78¢ per gallon and ranged from a low of 32.17¢ per gallon in Alaska to 80.87¢ per gallon in California and 77.10¢ per gallon in Pennsylvania. The equivalent rate for Kansas was 42.43¢ per gallon; for Colorado, 40.40¢; for Missouri, 35.82¢; for Nebraska, 52.50¢; and for Oklahoma, 38.40¢.
Recent increases in other states. In 2018, Oklahoma added taxes of 3¢ per gallon on gasoline and 6¢ per gallon on diesel. In November 2018, Missouri voters rejected an increase in gasoline taxes of 2.5¢ each year for four years beginning July 1, 2019. According to the National Conference of State Legislatures, Virginia and the District of Columbia increased gasoline taxes in 2020; Alabama, Arkansas, Illinois, Ohio, and Virginia enacted gasoline tax increases in 2019; California, Indiana, Montana, Oregon, South Carolina, Tennessee, and West Virginia increased gasoline taxes in 2017; and Utah accelerated indexing provisions enacted in 2015. In October 2016, New Jersey enacted a tax bill that, among other tax changes, increased the state’s fuel tax by 23¢ per gallon starting November 1, 2016, which was its first fuel tax increase since 1988. In 2015, eight states passed legislation to increase fuel taxes. In 2013, six states and the District of Columbia enacted legislation to increase or allow an increase (generally, by indexing the rate) in gas taxes, followed by three more states in 2014. Laws in 16 of the 31 states that have increased motor fuel taxes since 2013 include indexing provisions to automatically change the amount of the tax.
Tax Increases and Revenue Projections
In Kansas, during the 2019 Session, HB 2370 and SB 188 (identical as introduced) proposed phased increases of 3¢ a gallon for gasoline and 5¢ a gallon for diesel by fiscal year (FY) 2023.
The fiscal notes prepared by the Division of the Budget projected total increased revenues by FY 2023 of $40.0 million annually to the State Highway Fund (SHF) and $20.2 million to the Special City and County Highway Fund (SCCHF). Also in 2019, HB 2381 proposed 6¢ increases for all motor fuels, changing the allocations between the SHF and the SCCHF, and reducing the percentage of sales and compensating use taxes statutorily directed to the SHF. In the fiscal note for that bill, the Division of the Budget stated the Department of Revenue estimated the changes would increase motor fuels tax revenues to the SHF by $104.2 million but reduce sales and compensating use taxes directed to the SHF by the same amount. All three bills died in 2020, at the end of the biennium.
Fuels Usage and Tax Revenues
Kansas fuel tax revenues and gasoline usage fluctuate, as illustrated in the graphics on the following page.
Amounts Households Spend
According to the Bureau of Labor Statistics in the U.S. Department of Labor, U.S. households spent an average of $10,742 on transportation in 2019, which is an increase from $8,293 in 2011 and a 10.1 percent increase from 2018, due mostly to insurance costs. In 2019, $2,094 (19.5 percent) of the transportation total was spent on gasoline. If fuel prices average $1.89 per gallon, Kansas state fuel taxes account for 12.7 percent of the amount motorists spend.
State Gasoline Taxes as Portion of Overall Fuel Costs
|U.S. average||U.S. average||Kansas average||Kansas average|
|Vehicle, driving||Gallons used||Total fuel cost, at $2.12 per gallon||State tax average, $0.3638||Total fuel cost, at $1.89 per gallon||Tax average, $0.24|
|12,000 miles, 15 mpg||800||$1,696||$291||$1,512||$192|
|12,000 miles, 25 mpg||480||$1,018||$175||$907||$115|
|12,000 miles, 35 mpg||343||$727||$125||$648||$82|
|30,000 miles, 15 mpg||2,000||$4,240||$728||$3,780||$481|
|30,000 miles, 25 mpg||1,200||$2,544||$437||$2,268||$288|
|30,000 miles, 35 mpg||857||$1,817||$312||$1,620||$206|
|State gasoline tax as percent of overall fuel cost||17.20%||17.20%||12.70%||12.70%|
State tax costs from https://www.api.org/oil-and-natural-gas/consumer-information/motor-fuel-taxes and as of July 1, 2020.
American Petroleum Institute, “Combined Local, State and Federal (Cents per Gallon) Rates Effective 7/1/2020,” http://www.api.org/oil-and-natural-gas/consumer-information/motor-fuel-taxes, accessed November 6, 2020.
2018 Oklahoma HB 1010 and 2018 Missouri HB 1460. National Conference of State Legislatures, “Recent Legislative Actions Likely To Change Gas Taxes,” August 12, 2020, http://www.ncsl.org/research/transportation/2013-and-2014-legislative-actions-likely-to-change-gas-taxes.aspx, accessed November 6, 2020.
A very small percentage of the overall revenue increases projected would come from commercial vehicle fuel permit increases included in the bills.
Reports, Monthly Motor Fuel Reported by States, U.S. Department of Transportation, Federal Highway Administration, Office of Highway Policy Information, Motor Fuel, and the Highway Trust Fund. http://www.fhwa.dot.gov/policyinformation/motorfuelhwy_trustfund.cfm and reports for previous years, accessed November 6, 2020. Motor Fuel Activity Reports, Net After Refunds, https://ksrevenue.org/mfstats.html.
U.S. Department of Labor Bureau of Labor Statistics, news release dated September 9, 2020, “Consumer Expenditures–2019,” https://www.bls.gov/news.release/pdf/cesan.pdf, accessed October 13, 2020.
Jill Shelley, Principal Research Analyst
Aaron Klaassen, Principal Fiscal Analyst
Edward Penner, Senior Economist