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Senate panel rejects tax increases on fuels that were missed in 2015

PIERRE--South Dakota's highway fund doesn't receive tax revenue on the electricity used to power hybrid- and electric-powered cars and trucks. The Legislature raised most motor-fuel taxes and vehicle registration fees last year to provide big boo...

PIERRE-South Dakota's highway fund doesn't receive tax revenue on the electricity used to power hybrid- and electric-powered cars and trucks.

The Legislature raised most motor-fuel taxes and vehicle registration fees last year to provide big boosts in state and county highway funding.

But lawmakers decided against levying special fees of $40 for a hybrid and $80 for an all-electric.

The free pass for electricity as a vehicle fuel became the argument Monday against raising tax rates on other fuels that weren't addressed last year.

Sen. Mike Vehle, R-Mitchell, wanted to bring the tax rates on compressed natural gas, liquid natural gas and liquid petroleum (propane) gas up to the comparable levels for gasoline and diesel.

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He also wanted to do the same for a catchall rate that covers any motor fuel, except electricity, that isn't specifically listed in state law.

The Senate Transportation Committee voted 4-3 Monday to kill Vehle's measure, SB 110.

He is the committee's chairman.

Vehle said he lost in the negotiations last year over an electric-vehicle fee. He wasn't willing to revisit the matter Monday.

His refusal cost him.

Dawna Lietzke, the executive director for the South Dakota Petroleum and Propane Marketers Association, spoke against his cleanup legislation Monday because it didn't cover electric vehicles, too.

"They all do damage to the road and they all should be taxed and pay their fair share," Lietzke said.

She called it "a huge inequity."

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According to Lietzke, the federal government plans to designate alternative fueling corridors along major highways for electric and hydrogen vehicles by the end of 2016.

She said one or both of the interstates in South Dakota could be part of the new system.

Sen. Alan Solano, R-Rapid City, asked how the other fuels were skipped last year.

Vehle, who led the Senate's effort on the highway package, said legislators realized during the amendment process that they hadn't been addressed.

"We were haggling on a lot bigger issues," Vehle said. He acknowledged he didn't want to put the package at risk over a few small loose ends.

"That was my concern, the naysayers would say, 'What else have they forgotten?' " Vehle said.

Sen. Ernie Otten, R-Sioux Falls, asked how much would be generated from the propane and natural gas tax increases. "That is a very good question and I don't have the answer at this time," Vehle acknowledged.

Sen. Bill Shorma, R-Dakota Dunes, asked for a count of electric vehicles in South Dakota. Lietzke said she didn't know but would find out.

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Otten asked Lietzke what she would propose for a tax on electrics and hybrids. She referred to last year's fees that Vehle had originally proposed.

Then Otten asked Vehle's views.

"I'm for it," Vehle said. "I ran out of power."

He said he wanted this year's bill to be an easy fix to the things that were not in the play last year.

"If I get electric in there, it would take the whole bill down again. That was my concern," Vehle said.

Sen. Jim Peterson, D-Revillo, said he couldn't support the current bill unless it's "all-inclusive" regarding electric vehicles too.

Sen. Bernie Hunhoff, D-Yankton, said he opposed the electric tax last year because it is "doing hardly any damage" to roads.

"We should encourage the technology, not discourage it with a higher tax at this time," Hunhoff said.

Hunhoff and Peterson called for the bill to be killed. They received support from Solano and Otten.

Solano said he thought the $40 and $80 fees were reasonable.

Sen. Jeff Monroe, R-Pierre, conducted the hearing as vice chairman. He said after the vote that motor-fuel technology is going to become more advanced and more widespread in the years ahead and will need to be addressed.

"I think this was an effort to do that," Monroe said.

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