Legislative Session – Senators Propose Motor Fuel Tax Increase Behind Cover of Property Tax Reform

The Governor’s Office, Senate, and House have all put forward their version of legislation to address property tax reform. While the competing bills address broad property tax reform, the legislation put forward by the Iowa Senate stands out for its inclusion of motor fuel excise tax increases using the Consumer Price Index (CPI) as an automatic tax escalator. Senate Study Bill 3001, would impose automatic increases to Iowa’s motor fuel excise tax rates unless nullified by a joint resolution from the Iowa General Assembly, signed by the Governor, prior to April 30 preceding the imposition of the tax increase on July 1. Additional limitations on the annual excise tax rate increase include a CPI of zero or less, and a provision limiting tax increases for three consecutive years before a one-year break is imposed. Following the one-year break, three-consecutive annual motor fuel excise tax rate increases would be allowed once again. It’s noteworthy that the proposal put forward by the Senate does not require an annual vote to increase motor fuel excise tax rates.

Burying this tax increase on Iowans within a broad property tax reform package was intentional on the part of the Senate. This is an issue FUELIowa members will need to engage on. Fortunately, at this time the House property tax bill, and the Governor's office property tax bill, do not include motor fuel excise tax increases. Much more to come on fuel tax increases.

As legislative session enters its fourth week, FUELIowa would like to highlight a few bills for members to be aware of. The first, House Study Bill 593 would allow a courier to enter into an agreement with a retailer to purchase, store, and deliver lottery tickets on behalf of a consumer. The second highlighted piece of legislation is Senate File 638 and its House companion, House File 2011. Senate File 638 and its House companion would impose a 10 percent Ad Valorem tax on alternative nicotine products (pouches) and vapor products. Under this tax structure, each time you receive a wholesale price increase from the product manufacturer, the tax due increases accordingly. Last, Senate File 2013 would classify Kratom and Kratom derivatives as a schedule I controlled substance while making penalties applicable. Under the legislation proposed, a retailer facing a third violation for selling Kratom would be charged with a felony punishable by up to five years in prison and the assessment of a fine of up to $10,245.

As always, please keep a close eye on our bill tracker which is updated for your convenience every Tuesday in the FUELInsider. Members with questions on legislation are encouraged to contact the FUELIowa office.