Kentucky set to hike gas tax

Kentucky’s gas tax is set to increase by 1.5 cents to 21.1 cents on July 1, even though the cost of gasoline, which has been above $4 a gallon for much of the past month, has driven sales of gasoline down 2.6% in the state this year, the Louisville Courier-Journal reported.

Kentucky's diesel tax also increases on July 1 to 18.1 cents. The revenue generated by the fuel taxes goes to the state road fund.

The law in Kentucky is for the fuel tax to reset itself at least once a year based on the average wholesale price of gas in the state, according to the Courier-Journal. Since 2004, the tax has increased by a little more than a penny a year. If the wholesale price fell, the tax would follow suit.

Each penny of the gas tax brings in about $30 million in revenue for the state road fund, according to Gene Zaparanick-Brown, an economist for the state, but this year might be an exception, because people are driving less and buying less gas.

Consumers bought 10% less gas in March, for example, than they did last year, Russell Romine, acting budget director for the Kentucky Transportation Cabinet, told the Courier-Journal.

The state budget office predicts that wholesale prices will remain steady for the next year, so the state fuel taxes should do the same.