Alabama fuel tax rates increase Oct. 1

September 30, 2021

Keith Goble


The state of Alabama’s third installment of recent fuel tax increases takes effect on Friday, Oct. 1.

In 2019, Gov. Kay Ivey signed into law a bill to increase fuel tax rates for the first time in nearly 30 years.

Dubbed the Rebuild Alabama Act, the 2-year-old law authorizes tax rates to be increased by 10 cents over three years. In fall 2019, the gas tax rate was raised by 6 cents to 24 cents. The diesel rate also increased 6 cents to 25 cents.

One year ago, a follow-up increase of 2 cents was applied for gas and diesel bringing the rates up to 26 cents and 27 cents.

The third of three increases in the Yellowhammer State will be in effect before the weekend. As a result, the gas rate will be 28 cents and the diesel rate will be 29 cents.

Revenue jolt

Once fully implemented, tax collection from the Rebuild Alabama Act is estimated to raise $323 million annually.

Two-thirds of the revenue is to be used by the Alabama Department of Transportation. Counties collect 25% of additional funds and cities receive 8%. The money is used to fund infrastructure improvement, preservation and maintenance projects.

Indexing the fuel tax

The state is not done yet tapping the excise tax to bolster transportation funding.

Effective Oct. 1, 2023, excise rates also will be indexed. The change to indexing allows for the fuel tax to rise automatically with the rate of inflation.

The increase or decrease of the excise rates will be capped at one penny.

Grants programs

Also included in the Rebuild Alabama Act is a grants program for local highway and bridge work.

The program requires the state DOT to set aside $10 million annually from the state’s share of the fuel tax increase for local projects.

The governor’s administration announced earlier this month the third round this year of state funding being awarded to cities and counties. The $2.08 million in additional funding brings the total for the year for various local road and bridge projects to $10.04 million.

“More and more communities and cities across our state are seeing new road and bridge projects in their areas, and I look forward to that continuing,” Gov. Ivey said in prepared remarks. LL

More fuel tax coverage

Keith Goble, state legislative editor for Land Line Media, has written recently on multiple states with fuel tax changes in effect Oct. 1. Here are the recent articles by him.