Drivers in Kentucky will soon be paying less at the pump for the state’s gas tax, but that may mean less money available for repairing roads and bridges.
When the new fiscal year starts on July 1, 2024, the gas tax will drop 2.3 cents per gallon, from 30.1 cents per gallon to 27.8 cents per gallon.
The automatic decrease is due to a decline in the average wholesale price (AWP) of gasoline. The gasoline excise tax is calculated annually as 9% of the AWP and will drop from 23.7 cents to 21.4 cents per gallon.
In addition to the gasoline excise tax, Kentucky also imposes a supplemental highway user motor fuel tax of 5 cents per gallon and a petroleum assurance fee of 1.4 cents per gallon. Total taxes and fees for FY25 will be 27.8 cents per gallon.
The lower gas tax equates to roughly 32 cents saved per fill-up on a 16-gallon tank of gas.
The total cost consumers pay at the pump will depend on the overall gas market, including the cost of crude oil, international markets, etc. Currently, Kentucky gas taxes make up about 8.7% of the cost of a gallon of gas.*
Funds collected from the gas tax go toward Kentucky’s Road Fund. While drivers may see savings when the new gas tax rate takes effect, the state Road Fund and county road aid revenue may drop throughout the fiscal year, depending on how much gas is purchased.
Road Fund distribution
Road Fund revenue is distributed through a revenue sharing formula. Counties receive 18.3% of the gas tax to support county road construction and maintenance. County governments own and maintain half of Kentucky’s road miles and around a third of all bridges in the state.
Over the past ten years (FY14 to FY23) Kentucky's Road Fund has realized an $812.1 million reduction in its buying power, based on the National Highway Construction Cost index. Out of all the revenue streams that make up the Road Fund, the motor fuels portion (the only portion of the Fund counties receive) has experienced the deepest loss of buying power. For the Road Fund to have the same buying power today as it had in 2014, current day revenues would need to increase by $812.1 million.
*According to AAA, the average cost of gas per gallon in Kentucky on June 7, 2024 was $3.20, slightly lower than the national average of $3.47. With the current gas tax rate of 30.1 cents per gallon, Kentucky gas taxes are 8.7% of the cost of a gallon of gas.
