State considers sizeable transportation tax increase

Transportation funding is once again a topic of discussion at the Wyoming statehouse.

In the lead-up to the start of the 2026 regular session, the Joint Transportation, Highways and Military Affairs Interim Committee met this month to discuss proposals to help the state address funding needs. The panel also discussed English language proficiency requirements for truck drivers to operate in the state.

The Wyoming Department of Transportation reported the agency’s annual shortfall is about $411 million.

Recurrent theme of discussion

Transportation funding is a regular topic of consideration for the interim panel. The group meets each year between legislative sessions to review and discuss various transportation issues for possible pursuit during the upcoming regular session.

In recent years, the committee has considered various options to bolster transportation revenue.

In November 2023, the group backed away from a possible diesel tax increase.

The failed plan sought to increase the state’s diesel tax by 4 cents per gallon. To help counter additional costs for Wyoming-based truckers, the plan included a decrease in state vehicle registration fees.

At the time, WYDOT told lawmakers the proposal would result in a negative revenue impact totaling $17 million. The agency added that simply to break even, the diesel tax would need to be increased by about 11 cents.

Committee members responded by declining to advance the plan.

The panel also declined to advance a second bill draft to increase the state fuel tax rate on gas and diesel by 2 cents. The draft included a $20 reduction in vehicle registration fees for all vehicles.

Lawmakers were told the option would result in a negative revenue impact totaling $6 million.

In 2022, the interim committee voted to advance a fuel tax increase proposal to the regular session.

State lawmakers later voted not to consider the bill to raise the excise tax on gas and diesel by 15 cents over three years.

One year earlier, the House Transportation Committee voted to advance a bill to tap the funding source to enhance support for state and local road work.

The bill called for increasing the tax on gas and diesel by 9 cents over three years. The tax on alternative fuels would have been raised by the same amount.

The legislation did not receive a House floor vote, effectively killing it for the year.

Latest efforts

The interim panel met last week to discuss whether to once again move forward a proposal to increase the state’s 24-cent fuel tax rate.

Wyoming’s tax rate has remained unchanged since 2013. At that time, the 14-cent gas and diesel tax rates increased by 10 cents.

One option reviewed by the committee would index the transportation taxes. Indexing would allow for automatic increases in the future.

Another option would raise the fuel rates by 10 cents over multiple years.

Fuel tax indexing

The committee heard a presentation about variable fuel tax rate models.

According to the National Conference of State Legislatures, 26 states have variable rates. The setup allows taxes to change regularly based on inflation.

Sen. Stephan Pappas, R-Cheyenne, the committee co-chair, said the transportation panel had already decided to not pursue indexing during the 2026 regular session. He cited complexity of the issue that would hinder getting something done during the budget session that typically lasts about 20 days.

“The committee thought it was not a viable bill to put forward,” Pappas said.

Flat tax increase

The remaining option reviewed by the committee would raise the 24-cent fuel tax by 10 cents over multiple years.

An initial 5-cent increase would take effect in July 2026. Another nickel increase would be implemented in summer 2028. At that time, the tax rate for gas and diesel would be 34 cents.

Dennis Byrne, chief financial officer for WYDOT, told the committee each penny increase to the fuel tax raises $6.8 million annually for state and local funding. His agency would receive $4.5 million of that amount, which would total $22.5 million for a nickel increase.

Rep. Bob Nicholas, R-Cheyenne, said the Legislature needs to do something to address the agency’s continued transportation-funding shortfall.

“We live in an environment right now where any tax is taboo, from a political standpoint,” Nicholas said. “We’re basically saying, ‘We’re not going to raise the (fuel tax) a damn penny because I want to get reelected.’ We have to bite the bullet.”

Pappas said the fuel tax increase would be a band-aid for the problem.

“We still have long-term issues with road funding. This is not the solution. It’s just a little bit of help,” he said.

Wyoming Trucking Association President Kevin Hawley testified his group supports the bill draft.

“The trucking industry has been fairly supportive, historically, of an increase in fuel tax, as long as it was equal across the board with gas and diesel,” Hawley said.

He added that the group’s support is contingent on funds being used exclusively for the highway system.

The committee voted to hold the bill and continue discussion during the group’s Oct. 20 meeting. LL