McCutcheon Introduces $200 Million Fuel Tax Increase

mccutcheonAs expected, Representative Mac McCutcheon (R- Madison) introduced the second bill of a two bill package that will result in an increase in taxes on gasoline and diesel fuel of six cents per gallon.  HB394 was considered and given a favorable report by the House Transportation, Utilities & Infrastructure Committee today.  It will receive its second reading and will be available for full House consideration as early as next week, but most likely will not be addressed until legislators return from Spring Break the first week of April.

HB394 ties the total fuel taxes paid in Alabama to the average taxes/fees placed on gasoline by the contiguous bordering states.  The average of the taxes/fees for bordering states on gasoline is 26.95 cents/gallon, while Alabama is currently at 20.87 cents/gallon.  Therefore, the tax on gasoline will increase by 6 cents per gallon upon passage of this legislation.

Interestingly, the bill also ties the increase in diesel fuel taxes to that of the gasoline average.  The current average of the taxes/fees for bordering states on diesel is 26.31 cents/gallon, while Alabama is currently at 21.85 cents/gallon.  This is a differential of 4 cents/gallon, but since the proposed legislation ties the increase for diesel to the border state gasoline average, diesel will increase 6 cents/gallon which would place Alabama above the border state average on diesel by 2 cents/gallon.

The legislation also has an automatic adjustment mechanism that will re-calculate the border state average once every four years over the next 12 years.  Not coincidentally, the adjustment occurs in the year following the election of the legislature.

The fuel tax increase contemplated by the legislation will result in a $200 million increase in taxes.

Ainsworth Only “No” Vote in Committee

The House Transportation Utilities & Infrastructure Committee is chaired by Representative Lynn Greer (R- Rogersville) and is made up of 9 Republicans and 4 Democrats.  McCutcheon’s bill, along with Senator Gerald Dial’s bill, SB180 (the “Accountability” bill directing how the increased taxes will be spent) were both given a favorable report on voice votes by the committee.  The only “No” vote on the tax increase was cast by Representative Will Ainsworth (R- Guntersville).  If you would like to contact Ainsworth, a rising star in conservative circles, he can be reached at will.ainsworth@alhouse.gov.

The other members of the Committee are Representatives Joe Faust (R- Fairhope), George Bandy (D- Opelika), Napoleon Bracy (D- Prichard), Barbara Drummond (D- Mobile), Victor Gaston (R- Mobile), Dexter Grimsley (D- Newville), Nathaniel Ledbetter (R- Rainsville), Phillip Pettus (R- Killen), Chris Sells (R- Greenville), Kyle South (R- Fayette) and Margie Wilcox (R- Mobile).

The committee considered the legislation for approximately 30 minutes and at no time did any committee member acknowledge that the legislation creates a $200 million tax increase.

Lots of Trough Feeders

The list of supporters for the $200 million tax increase is a long one.  Led by the Business Council of Alabama, the coalition of those that will benefit from road construction projects include the Alabama Department of Transportation, the Alabama Roadbuilders Association, the Association of County Commissions of Alabama, contractors, engineers and others.

“Thank Goodness for Mississippi”

The taxes/fees paid by the citizens of the State of Mississippi are 18.79 cents/gallon for gasoline and 18.4 cents/gallon for diesel, representing the lowest of the four contiguous border states.  However, legislators in Mississippi are considering raising their taxes/fees on fuel by a whopping 17 cents/gallon.  If this were to occur, their action, taken in Mississippi, will raise Alabama’s fuel taxes by another 4 cents/gallon or another $130 million.  Alabama’s citizens, in effect, will have their taxes raised without any representation.  Similarly, the State of Florida pays 36.58 cents/gallon in taxes/fees on gasoline, of which 19 cents/gallons are imposed by the various counties.  Again, Alabama’s citizens could be subject to an increase in taxes because of an action taken in a county in Florida.

Stay tuned….

AFA Legislative Update

statehouse3The Alabama Legislature returns this week to work its 15th and 16th legislative days.  The pace of work has been brisk and principally directed towards passing the constitutionally mandated spending bills as early as possible, perhaps before they take Spring Break on the week of March 28th.

General Fund Appropriation

The Senate has passed a General Fund Appropriation bill (SB125) and Chairman Steve Clouse has quickly moved the bill through the House Ways & Means Committee to allow floor consideration as early as Tuesday of this week.  The House committee made some slight changes to the Senate version and the Senate is expected to concur with those changes if the bill comes out of the House in similar fashion to what was passed from committee.  There is expected to be much discussion regarding Medicaid funding and it will probably be a contentious day in the House.  If the Senate concurs with the House bill, the Governor is expected to veto the bill because it does not include enough for Medicaid.  The legislature is expected to override the Governor’s veto and is anticipating a potential special session to address the issue later in the year.

Education Fund Appropriation

The Appropriation bill for education spending, HB117 sponsored by Representative Bill Poole (R- Tuscaloosa) has passed the House of Representatives and now moves to consideration by the Senate’s Finance & Taxation Education Fund committee.  The committee, chaired by Senator Arthur Orr (R- Decatur) is expected to consider the bill in the next week or so.  The bill passed with no opposition in the House.

Fuel Tax Increase

The House of Representatives is expected to take up the “Accountability” portion of the fuel tax increase package, SB180 sponsored by Senator Gerald Dial (R- Lineville), on Wednesday in the House Transportation committee.  The long-awaited introduction of the second bill, the actual fuel tax increase itself, is also expected to occur this week.  The bill, sponsored by Representative Mac McCutcheon (R- Madison), is expected to include an increase in both gasoline and diesel taxes, a mechanism to automatically adjust the tax on a four year basis (without any future votes required) and an index from which to make the adjustment.  The index most prominently discussed to date would include an average of surrounding contiguous states.  AFA is opposed to any new fuel tax increase until transparency and fiscal accountability and a change in prioritization (allowing counties more revenue) for existing fuel taxes is implemented.  An automatic adjustment mechanism, especially one linked to other state’s actions, is also not supported.

Property Tax Increase

A bill, SB136, sponsored by Senator Vivian Figures (D- Mobile) would set up a state-wide referendum to increase property taxes by 5 mils to be dedicated to Medicaid funding.  The bill was given a favorable report out of the Senate’s Finance and Taxation General Fund Committee last week.  The committee, chaired by Senator Trip Pittman (R- Montrose), voted 7-6 in favor of the bill.  During the committee’s discussion, it was apparent that several committee members were in favor of discussing property tax increases as part of the overall “solution” for the constantly challenged General Fund Appropriations process.

The six senators that opposed the bill were Clyde Chambliss (R- Prattville), Steve Livingston (R- Scottsboro), Tim Melson (R-  Florence), Paul Sanford (R- Huntsville), Larry Stutts (R- Tuscumbia) and Cam Ward (R- Alabaster).  Please contact these members and express your appreciation for their support in opposing the property tax increase.  Their contact information can be obtained here.

The seven senators voting in favor of the property tax increase included 4 Republicans and 3 Democrats:  Trip Pittman (R- Montrose), Greg Albritton (R- Range), Bill Holtzclaw (R- Madison), Jabo Waggoner (R- Vestavia Hills), Priscilla Dunn (D- Birmingham), Billy Beasley (D- Clayton) and Bobby Singleton (D- Greensboro).