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Director Report – Fuel Tax Increase

Potential Arizona Fuel Tax Increase

We are anticipating a potential big legislative battle in the upcoming session. We are expecting a major push for a fueltax increase this year, sponsored by Senator Bob Worsley.  Per the recommendations detailed below, the bill may include a substantial 36 cents per gallon increase, future tax indexing and a new 11% sales tax on fuel sales.

An interim committee called the Surface Transportation Funding Task Force met this fall to recommend how to fund Arizona’s roads.  Their final report and recommendations to the Legislature and Governor are available in full here (all 384 pages).  In summary, they proposed:

  • To fund Arizona’s principal interstate highways over the next 20 years (total cost of $20 Billion):
    • Increase to both gas and diesel taxes of 16 cents per gallon, phased in at 2 cents per gallon per year from 2020 through 2027 and indexing at the rate of the gross national product implicit price deflator (GNPIPD).  This is projected to raise $9.9 – 12.4 Billion over 20 years.
    • Create a new sales tax on all fuel sales of 5%.  This is projected to raise $10.1 – 12.6 Billion over 20 years.
    • Modify annual registration fee for alternative-fuel vehicles to be equivalent to estimated fuel tax paid on gas-powered vehicles.
  • To fund the Highway User Revenue Fund (HURF) for the next 20 years (total cost of $40 Billion):
    • Increase to both gas and diesel taxes of 20 cents per gallon, passed in at 2 cents per gallon per year from 2020 through 2029 and indexing at the rate of the GNPIPD.  This is projected to raise $11.2 – 14 Billion over 20 years.
    • Create a new sales tax on all fuel sales of 6%.  This is projected to raise $12.1 – 15.2 Billion over 20 years.
    • Modify annual registration fee for alternative-fuel vehicles to be equivalent to estimated fuel tax paid on gas-powered vehicles.
    • Increase vehicle registration fee and title fee by $100 starting in 2020.  This is projected to raise $12.2 – 15.1 Billion over 20 years.
  • To fund DPS highway patrol with funds outside of HURF, it was recommended that the vehicle license tax be raised by 15% beginning in 2020 (subject to annual adjustment based on DPS’s budget).  This is projected to raise $111 – 139 Million per year.  Current DPS budget is ~$112 Million.

The APMA Legislative Committee will be meeting Friday, January 13 to discuss this and other legislative priorities.  If you’d like to be added to the Legislative Committee email list or participate in meetings, please contact APMA.  The association will provide updates throughout the session.