‘Pretty simple mathematics:’ Bill filed to redo gas tax, up revenue for KY roads
A Kentucky legislator filed a bill Wednesday that would overhaul the formula for taxing gas in Kentucky and increase some motor vehicle fees.
House Bill 370, from Rep. Tom Smith, R-Corbin, would change the formula from roughly a 9% excise tax to a fixed cents-per-gallon rate. Given the current relatively low price of gas, the total price consumers pay for an average trip to the pump would increase under the bill.
Smith told the Herald-Leader the change is needed because the cost of maintaining roads has gone up, but state revenue from the gas tax — one of two primary sources of revenue for the state’s Road Fund, alongside the motor vehicle usage tax — is plateauing.
“It’s pretty simple mathematics. If your revenue stream has stayed the same for 15 years and your cost has gone up 30%, you’ve really lost 30% of your ability to do maintenance and do roads,” Smith said.
Under the current system, Kentucky gas dealers pay a tax of roughly 9% of the wholesale price of all gasoline and fuel. Smith’s bill scratches that model. According to the bill’s language, there would be an excise tax of 29.6 cents per gallon for fiscal year 2026-2027 and 34.6 cents per gallon for fiscal year 2027-2028.
That would be a price jump compared to the current rate of 25 cents per gallon. The excise tax is paid by dealers, but is typically passed on to consumers in the per-gallon prices they pay.
The monthly revenue from the gas tax in December 2025 was $68.6 million. The same month in 2015, it was $61.6 million and in 2010, it was $59.5 million. Compared to 2010, the latest monthly haul is up 15%; meanwhile, inflation since December 2010 is up 48%.
Smith said he understands that his issue could prove thorny. The GOP caucuses, since gaining supermajorities in the House and Senate in Frankfort, have prioritized lowering taxes. In 2022, they passed a bill setting Kentucky’s personal income tax on a path to get to zero.
He guessed the bill had a “15 to 20%” chance at passage, and said it hasn’t gotten explicit approval from committee chairs or leadership. Smith argues that there’s a recognition some kind of change is needed, though.
The increased fuel efficiency of vehicles, as well as the adoption of electric vehicles, has hindered the amount of revenue collected each year, he added.
“I don’t know of any legislator in the body that would tell me they’re for a tax. So, is it an uphill battle? Yes. But really, the only area that we can increase transportation (revenue) is through our fuel. That’s what maintains our roads — not only our state roads, but our county roads,” Smith said.
The state does send some money every year to counties for road projects and maintenance. He said that county officials, in particular, are feeling the pinch with federal dollars from the pandemic drying up and big costs like county jails starting to ramp up.
The bill also raises standard passenger vehicle registration from $11.50 to $22, motorcycle registration from $9 to $15 and the driving history record fee from $3 to $6.
The surtaxes for heavy equipment currently on the books are retained, but changed from being based on wholesale prices to a fixed cents-per-gallon cost, similar to how the bill would change the tax for other vehicles.
In July 2028, the bill would mandate that the tax rate be shifted each year based on the change in the quarterly National Highway Construction Cost Index compared to the same rate the year prior. The rate would be limited from increasing or decreasing more than 5% year over year.
This story was originally published January 15, 2026 at 10:12 AM.
