Higher Shipping Costs Coming as Transportation Budget Compromise Includes Huge Diesel Tax Increase

After nearly a week of contentious, on-again, off-again negotiations, Gov. Mike DeWine and House and Senate leaders agreed today to a compromise that bridges the differences between the governor’s original proposal and the House-passed and Senate-passed versions of the state transportation budget, House Bill 62. The compromise proposal will be voted on later today by the full House and Senate.

Though there were numerous policy differences between the different versions of HB 62, the primary sticking point was how much to increase the gasoline and diesel fuel tax rates. Both are currently at 28 cents and were last raised in 2005. The agreement will result in a gas tax increase of 10.5 cents, bringing the total tax to 38.5 cents, and a diesel tax increase of 19 cents, bringing the total tax on diesel to 47 cents. Both increases will become effective on July 1, 2019.

While the Ohio Chamber supported the governor’s call for a meaningful increase in the gas tax in order to adequately and reliably fund Ohio’s transportation system, we also strongly objected to establishing different rates for gas and diesel fuel. So we’re disappointed that the governor and the legislature agreed to a diesel tax increase that’s nearly double the gas tax increase.

Diesel fuel powers our economy, because it’s what the trucks that deliver Ohio-made products to market run on. A 19 cent increase on diesel will move Ohio well past the state average of 30.2 cents of tax per gallon and leave us with the sixth highest tax rate on diesel fuel in the country. This does not make Ohio more competitive and will be damaging to Ohio’s economy and to our businesses. Increased fuel costs lead to higher costs at every point on the supply chain, and businesses will need to look for other costs to cut or raise the prices they charge their customers. Eventually, consumers will feel the pinch, too.

The Ohio Chamber also advocated that all users of the transportation system should assist in paying for the construction, maintenance, and repair of the roadways, and HB 62 does include a new fee for those users not currently paying fuel taxes. However, the fee – $200 per year on electric vehicles and $100 on hybrids – may be too high and could have the effect of deterring the adoption of these relatively new products.

Adequate funding of Ohio’s roads, bridges, and other transportation infrastructure needs is vital to the health of our economy. Unfortunately, the final version of HB 62 puts the burden disproportionately on Ohio businesses.

For a .pdf summary of the legislation, click here.