The State Motor Fuel Tax has not changed since 2005

By Jason Warner, GOPC Manager of Government Affairs

Since 2011, 33 states plus the District of Columbia have raised motor fuel taxes to meet the demand for increased revenues for transportation projects. These increases have provided needed funds to refurbish and replace outdated and failing infrastructure.

In Ohio, the state legislature last modified the motor fuel tax in 2003, when lawmakers voted to phase-in a three-year, six cent increase, raising the rate from 22 cents per gallon (as it had been for ten years, to 28 cents beginning on July 1, 2005. Ohio’s rate now ranks 29 among all states and the District of Columbia. However, the revenue generated and the buying power of that revenue is not what it used to be. Couple this with an increase in fuel efficiency for vehicles on the road, along with substantially more hybrid and all-electric cars on the road, and the long-term sustainability of Ohio’s current gas tax remains in question.

After the rate was last adjusted in 2005, Ohio collected more than $1.712 billion in revenue from the gas tax. By 2016, the number had remained virtually unchanged ($1.714 billion), while costs due to inflation have increased at a rate of 29.3% over that same period. What cost $100 in 2005 today costs $129.26. Had the tax rate adjusted along with inflation, Ohio could have collected just over $2 billion in 2016. This year, the number would be over $2.2 billion.

Ohio did invest in infrastructure in other ways – most notably taking out bonds against future tolling revenues generated by the Ohio Turnpike. That action generated $1.5 billion in one-time revenue, along with an additional $1.5 billion raised through federal and local matching funds. Through an agreement, money generated on from the turnpike bonds was spent in the area near the turnpike, freeing-up other state revenue to be spent on infrastructure around the rest of the state. That funding has made a difference, but is now gone and will need to be made-up in other ways.

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In the past four years, all of Ohio’s neighboring states have taken action to adjust the gas tax, including

  • Pennsylvania (2014) approved a 27 cent per gallon increase to be phased-in over 4 years

  • Michigan (2015) approved a 7.3 cent increase and set the rate to automatically adjust with inflation beginning in 2022

  • Kentucky (2015) approved a 4.9 cent increase and eliminated a statutory law which adjusted the MFT based on the wholesale price of fuel up-to four times per year

  • Indiana (2017) approved a 10 cent per gallon increase, along with an annual inflationary adjustment that will continue through 2024.

  • West Virginia (2017) approved a 3.5 cent per gallon increase

The changes in Pennsylvania for example, are generating funds that are expected to create 50,000 new jobs and preserve 12,000 existing jobs, in addition to creating a multi-modal fund that provides up-to $144 million for bike/ped projects, creates new revenue streams for transit in addition to providing funding for repairing deficient bridges and roads.

While the Ohio Constitution restricts the use of motor fuel tax revenues exclusively for roadway projects, an increase in the state gas tax would free-up funding Ohio receives from other sources, including federal highway funds, that can be used to fund public transportation projects in the state. GOPC recently recommended that the state increase the amount of federal “flex funds” used for public transit, and to dedicate the recommended $33 million in additional funding would require an increase of just half-a-cent.