(The Center Square) – Nebraska drivers are feeling a little less pain at the pump as the motor fuels tax rate dropped to 28.7 cents per gallon on Jan. 1. This is down from a 33.2-cents-per-gallon tax, according to the Nebraska Department of Revenue.
The tax, which pays for transportation projects, was increased in July from 29.3 cents. Nebraska's fuel tax is less than half of the tax in California, which, at 50.5 cents per gallon, is the highest tax in the nation, according to the American Petroleum Institute.
Nebraska’s tax, however, is more than triple that of Arkansas’ 8.95 cents per gallon, the Institute says.
“What happened was that when we had this COVID-19 pandemic, people weren’t driving as much,” Doug Kagan, president of Nebraska Taxpayers for Freedom, told The Center Square. “The state wasn’t getting as much money, so they raised it. Now they’re lowering it because people are driving more.”
Nebraska adjusts the fuel tax twice a year based on several factors, including the price of fuel. Kagan said the fuel tax would be better as a fixed amount rather than a variable rate that changes twice a year.
“It’s like a roller coaster, it goes up and down,” Kagan said.
Another approach, he said, would be to determine the amount the state needs for transportation each year and adjust the gas tax accordingly to fund those projects.
“You could adjust for that but, ordinarily, I’d say keep it static,” Kagan said.
Property taxes are more of an important issue, and lowering property taxes would help the state recruit more industry, Kagan said.
“The main problem is that Nebraska has a 19th-century tax system,” Kagan said. “There’s a heavy reliance on property taxes that was established in the 1800s when most people lived on farms and ranches.”
Now many Nebraskans live in cities, where property taxes have steadily increased, Kagan said.
In August, the Nebraska Legislature passed a state income tax credit for property taxes paid to support K-12 schools. The credit is expected to lower property taxes 3% at first and will be expanded in later years.