FUNDING: Nebraska gas tax to increase by 1.5 cents in the new year

Dec. 23, 2016

This new rate will go into effect Jan. 1, 2017.

In an example of a state legislature recognizing that a modest tax increase can—in definace of its governor—have a profound impact on transportation planning and project initiatives, Nebraska State Tax Commissioner Tony Fulton announced this week that the state gas tax will increase to 27.3 cents per gallon, up from its current level of 25.8 cents.

This new rate will be in effect for the first six months of 2017.

The 1.5-cent increase stems from legislation passed in 2015 that calls for increasing the state fuel tax by a total of 6 cents per gallon over four years. The first 1.5-cent hike took effect in January 2016.

The Transportation Innovation Act has earmarked revenue from the tax increase for expressway construction and transportation-related economic development projects, as well as—notably—county bridge improvement. The act is expected to boost state highway coffers by $450 million. The total includes $400 million to be raised through the tax increase and $50 million from the state’s cash reserve fund.

Gov. Pete Ricketts fought the gas tax hike, which lawmakers passed over his veto, but he pushed hard for the earmark bill. In September, he announced a plan to complete the remaining 132 miles of the state’s 600-mile expressway system by 2033, using $300 million of the funds to be collected under the act.

The new law also sets aside money for a matching-grant program to complete county bridge repair and for transportation projects that could entice a manufacturer to expand or situate in Nebraska.

The state gas tax has three components. The component affected by the recent legislation is the fixed tax. It is set by state law at 12.3 cents per gallon for 2017.