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Daugaard Cheap? Gas Tax Hike Matches New Revenue in Senate Bill 1

Udpate 12:50 CST: My original post ignored a 3% wholesale tax imposed by Senate Bill 1. I have refigured my spreadsheet and adjusted the text here to include that new tax in this explanation.

Wait a minute: did I call Governor Daugaard cheap? His road plan would raise you gasoline tax just as much as the Legislative plan he's rejecting.

We don't have the Governor's formal bill yet, just the points he laid out in his State of the State Address yesterday. The Governor proposes raising the tax on motor fuel two cents per gallon each year, starting this July. He gave no sunset date. He says that hike would raise $13.75 million in the first year.

Governor Daugaard justifies that annual increase by pointing out the failure of our motor fuel tax to keep up with inflation:

The legislature implemented the current $.22 motor fuel tax in 1999. That was 16 years ago, when I was in the State Senate, and Bill Janklow was governor. Gasoline was around $1 per gallon, so the motor fuel tax at the time represented 22% of the total price per gallon. That per-gallon fee of $.22 was fixed in statute and has been the same for the last 16 years. If the legislature had indexed the gas tax to inflation for construction costs, the fuel tax would be $.45 today – more than double [Governor Dennis Daugaard, State of the State Address, as transcribed by that Sioux Falls paper, 2015.01.13].

Two cents more each year won't break 45 cents per gallon until 2027 (Fiscal Year 2028).

Senate Bill 1 raises the motor fuel tax in smaller increments, from 22 cents per gallon now to 28.16 cents per gallon in 2025. SB 1 doesn't start boosting the tax until next year. SB 1 specifies no increases after that.

To keep up with inflation, SB 1 creates a new 3% tax on the wholesale price of motor fuel. That tax starts at 7.5 cents per gallon, which is then established as an ongoing minimum, just in case oil prices miraculously stay cheaper.

You can check out my spreadsheet comparing the Governor's motor fuel tax proposal with Senate Bill 1. I assume constant gasoline demand extrapolated from the Governor's first-year revenue estimate. For the wholesale fuel tax, I assume 3% inflation from this year's levy and further assume that the cost will be passed on fully to consumers at the pump. Your mileage may vary. Here's the fiscal impact by July 1, 2026:

  1. The Daugaard plan would have South Dakotans paying 5.8 cents more per gallon than SB 1.
  2. The SB 1 motor fuel taxes raise more revenue than the Daugaard motor fuel tax for the first five years.
  3. In Fiscal Year 2021, Daugaard's fuel tax raises more revenue than SB 1's motor fuel taxes.
  4. In FY2026, Daugaard's two-cent-per-gallon increases will bring in almost $40 million more than SB 1's smaller retail per-gallon hike and 3% wholesale tax.
  5. A household driving 20,000 miles a year and averaging 30 miles per gallon would pay around $293 in annual fuel tax under the Daugaard plan, versus around $255 under SB 1 and $147 under the current 22-cent tax.
  6. Over the next eleven years, the Daugaard fuel tax raises $907.5 million in additional revenue; the SB 1 fuel tax, $884.6 million. Translation: The Daugaard motor fuel tax takes 2.6% more money out of your pocket at the pump than Senate Bill 1.

The plan Governor Daugaard laid out yesterday raises the vehicle excise tax from 3% to 4%, just like SB 1. Daugaard raises vehicle registration fees 10%, just like SB 1. We'll see where the Daugaard plans gets its savings over SB 1 in its final draft when it hits the hopper.

But as it stands right now, over the next eleven years, Governor Daugaard's plan would hit you as hard as Senate Bill 1 when you buy, register, and gas up your car.

Related Reading:

  1. John Tsitrian calls Governor Daugaard for reneging on his 2010 no-new-taxes pledge after ignoring obvious shortfalls in road funding throughout his first term.
  2. Bob Mercer lists the new revenue Governor Daugaard would get from his various tax and fee increases in the first year of the plan.


  1. mike from iowa 2015.01.14

    How much of the tax increase is dedicated to road repair and how much more will wingnuts siphon off for pet projects?

  2. grudznick 2015.01.14

    I cannot understand spread sheets, but Mr. Mercer's explanation seemed to defy your French math, Mr. H. Was your sheet with math just a part of the tax increase or the part about buying new cars too? Either way is it right that nobody who doesn't drive wouldn't pay except for when the bus companies raise our tickets?

  3. Wayne B. 2015.01.15


    The fuel taxes and registration fees legally can only go for road maintenance and construction.


    What's interesting to me is the pain promulgated by our potentate proposes to put primary pressure on passenger vehicles. Only $2 million of that $50 million increased annual revenue proposed came from increasing the cost of non-commercial heavy vehicles (aka farmers' semi trucks).

    Our governor was explicit how one ~legally~ loaded semi is worth 9600 passenger vehicles traveling the same stretch of road.

    I don't know I'm in favor of a semi truck paying 9600 times more than me for everything, but I certainly think they should be sharing in the increased pain more than they are (both commercial and ag-based trucking).

    SB 1 at least spreads that pain out - increases the wheel tax limit so tractor trailers & the semi tractor both contribute more. Dyed fuel contributes too, and I know that's controversial, but when I see an articulated tractor with fertilizer & air seeder running down the road, I think maybe just maybe they ought to be helping to pay for that maintenance.

  4. Bill Dithmer 2015.01.16

    Jenny, how dare you. I have never sent a duplicate post in my life, ever.

    Now can we talk about this bridge I have for sale? It crosses the Missouri River between Ft Pierre and Pierre. For my purposes I'm saying it's structurally sound because hundreds of cars and trucks use it dayly. Think toll bridge.

    Its appraised value is over $100,000,000 but the owner says move it while we still can. I mean they have to much inventory and want to liquidate some holdings to increase their bottom line. The owners are asking $10,000,000 but I think you could get them down to $5,000,000. For some reason their really motivated.

    I'll tell you what, I'll tell them I'm willing to take a cut from 17% to 5%, that should do it.

    What do you say we set down and pound out an offer on the laptop, you can cut me a check, and maybe we can close on this in 24hrs.

    This is the only way I could bring up this subject. If DD feels strongly about his roads, he'd better be on that bridge first or it will only be good for scrap. Its a long ways north and a good jaunt south. Its time

    The Blindman

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