New Mexico weighs 3-cent gas tax hike to fund road repairs

New Mexico lawmakers are weighing a proposed three-cent increase to the state’s gasoline excise tax, which would raise the rate from 17 cents to 20 cents per gallon. The Revenue Stabilization and Tax Policy Committee heard testimony on the bill, which supporters say is needed to keep pace with the rising cost of road repairs.

State Sen. Bobby Gonzales, who backs the measure, said the added cost to drivers would be modest. “Say you buy 12 gallons a week, 3 cents a gallon is 36 cents per week, but is under 20 dollars a year,” Gonzales said. “Less than one tank, is under 20 a year. Bad roads cost them more in repairs.”

The proposal would generate about $57 million a year for the state, with roughly $9 million directed to road work funds for cities and counties. The discussion comes after the New Mexico Department of Transportation told lawmakers that road construction costs are projected to grow by 136% by 2050, while NMDOT’s ongoing projects are worth a collective $1.4 billion.

Gonzales said the tax increase would close about one-fifth of NMDOT’s projected funding gap in coming years. Other lawmakers raised concerns about the timing, noting that a war in Iran has pushed fuel prices higher across the country.

“I think the challenge for you, senator, when you’re presenting this bill, is addressing those issues, because every single person is going to be thinking about how much they just had to spend on their gas tank and filling up their gas,” said Sen. Carrie Hamblen.

Under the proposal, the state’s special fuel excise tax, which includes diesel, would also rise from 21 cents to 25 cents per gallon. The legislative session starts in January, and if enacted, the fuel tax increases would take effect in July 2027.

Lawmakers also discussed changes to the state’s Motor Vehicle Excise Tax that would not raise taxes but would allocate a larger share of existing revenue toward road work.