FRANKFORT — As gasoline prices fluctuate, the state is getting ready to charge motorists 1.9 cents more for a gallon of gas at the pumps.
The tax increase, effective July 1, is the result of a 1980 law that ties the state's gas tax to the average wholesale price of gasoline.
The law took effect 31 years ago amid concerns that skyrocketing gas prices would cause people to buy less, which would mean less money for the state's Road Fund, which pays for road projects.
Greg Harkenrider, acting deputy executive director for the Governor's Office for Policy Research, said a survey in April showed an increase in the wholesale price of gasoline. Consequently, the state will raise its overall tax rate from 25.9 cents a gallon to 27.8 cents a gallon.
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He said Kentucky's total tax rate on gasoline has three components: variable rate, supplemental rate and an underground-storage tax.
The variable rate is what will change July 1, from 19.5 cents to 21.4 cents a gallon.
It often changes, but this is one of the bigger changes. State Transportation Cabinet spokesman Chuck Wolfe noted that it rose 0.3 cents in January.
The supplemental rate, or user fee, is a flat tax of 5 cents a gallon. The underground-storage tax is 1.4 cents, and money from it is used to repair underground storage tanks.
A state survey of the wholesale price is done every three months. Any change in the tax rate is reflected at the pumps three months later. The next survey will be in July. Any change would take effect in October.
According to the Tax Foundation in Washington, D.C., as of Jan. 1 Kentucky ranks 31st in the nation in gas tax rates. California is the highest, at 47.7 cents a gallon and Alaska the lowest, at 8 cents. The federal gas tax rate in each state is 18.4 cents a gallon.
Beginning July 1, Kentuckians will shell out 46.2 cents a gallon for state and federal taxes.
The July increase of 1.9 cents a gallon in Kentucky could generate millions of dollars for the Road Fund.
"Historically, the increase has yielded about $30 million per penny," Wolfe said. "So, on an annualized basis, an increase of 1.9 cents per gallon would yield about $57 million."
Wolfe said the amount depends on how much fuel the public buys.
"When gas prices go up, people usually cut back," he said.
The Road Fund, which receives most of its revenue from fuel taxes, appears to be in fairly good shape.
The state reported last week that the fund reported an increase of 10.5 percent in May and 11.6 percent for the fiscal year that ends June 30, beating an expected 4.9 percent growth.