Eight states pursue fuel tax relief

A trend in statehouses from coast to coast is the pursuit of changing how much fuel tax is collected from motorists and truckers.

Advocates for trimming fuel tax collection at the state level say the time is right for the move. They cite new federal funding for transportation purposes, higher fuel costs and budget surpluses that could cover reductions in fuel tax collections.

California

On the heels of California Gov. Gavin Newsom unveiling his budget plan, which includes freezing the state’s fuel tax rates, multiple state legislators want to take extra steps.

The tax freeze is part of Newsom’s plan to spend a $45 billion state surplus.

In his proposed budget, the governor included information on a suspension of the expected inflation-related increases this summer to the state’s fuel excise rates.

The state excise rate on gas is 51.1 cents and the excise rate on diesel in 38.9 cents. Additional state taxes and fees bring the total per-gallon rates for gas and diesel to 56.6 cents and 65.9 cents, respectively.

An annual inflation adjustment is set to take effect on July 1. Newsom’s plan is to delay the adjustment for a minimum of one year. The budget proposal could extend the tax freeze for the next two years “should economic conditions warrant it.”

The governor’s office said a pause is expected to decrease fuel tax revenues by $523 million in 2022-23 based on an estimated 5.6 % inflation rate.

“We’re going to backfill it in terms of the tax itself to transportation projects so that there’s no direct impact to investments,” Newsom said at a news conference announcing the plan.

One state legislator would go even further than what the governor is proposing.

Assembly member Kevin Kiley, R-Rocklin, has introduced a bill to completely suspend collection of fuel taxes for six months.

“This bill puts money back into the pockets of families at a time when they need it most,” Kiley stated. “Inflation and record gas prices are making our state even less affordable. Californians need relief.”

To compensate for lost tax revenue, AB1638 calls for transferring money from the state’s general fund to the state’s transportation tax fund.

The Governor’s “gas tax holiday” is hardly worth celebrating. He’s merely holding off on yet another increase. My bill would suspend the gas tax entirely.

— Kevin Kiley (@KevinKileyCA) January 12, 2022

The second bill from Assembly member Janet Nguyen, R-Huntington Beach, would put a restriction on fuel tax rate adjustments.

AB1626 would limit the annual adjustment to a maximum of 2% for rate adjustments made on or after July 1, 2023.

Colorado

About six months after inking a massive transportation funding deal that included a new 2-cents-per-gallon fee on gas and diesel, Colorado Gov. Jared Polis wants to apply the brakes.

Tax and fee increases included in the funding deal are estimated to raise $5.4 billion over 10 years. The increases are scheduled to take effect on July 1. Annual penny increases to the fee on gas and diesel are set to follow each year through 2028.

When announcing his transportation plan a year ago, Polis said “it’s time to finally fix our damn roads.” Fast forward to the beginning of this year’s regular session, he says now is not the time.

“What I think we can all agree on now is now is not the time. … Let’s show people relief at the pump,” Polis said at a Jan. 10 news conference.

Instead, Polis wants to bid on competitive grants through the federal infrastructure bill.

The legislature must approve his plans.

Maryland

One Maryland bill would take action to prevent automatic adjustments in the state’s fuel tax rates.

Maryland law authorizes fuel rates to be adjusted each July based on the consumer price index.

HB144 would repeal the rule for annual adjustments.

Since July 1, 2021, the gas tax has been set at 36.1 cents and the diesel rate at 36.85 cents.

The House Ways and Means Committee is scheduled to hold a hearing on the bill Wednesday, Jan. 19.

Tennessee

A Tennessee House bill would provide truck drivers and others fueling in the state some relief at the fuel pump.

Rep. Bruce Griffey, R-Paris, has introduced a bill to return the tax rates to where they were prior to a 2017 state law that raised the gas tax by 6 cents to 26 cents and increased the diesel rate by 10 cents to 27 cents.

Instead of relying on the additional fuel tax revenue to fund transportation and infrastructure projects, HB1650 would reroute funds from the state’s budget surplus to roads and bridges.

In fiscal year 2021, Tennessee collected $3.1 billion more in taxes than the legislature budgeted, Griffey said.

“The state would continue to fund transportation and highway projects at the same financial level while at the same time giving tax relief to its citizens,” Griffey said in a news release. “We wouldn’t miss a beat with our infrastructure projects because Tennessee has the money.”

Missouri

In the Show-Me State, some legislators want to reverse course on a recent fuel tax increase.

A year ago, Gov. Mike Parson signed into law a bill to raise the 17-cent fuel tax rate by 12.5 cents over five years.

Since Oct. 1, the state is collecting 19.5 cents per gallon on fuel purchases. The tax rate will climb to 29.5 cents by July 1, 2025.

Rep. Sara Walsh, R-Ashland, and Sen. Mike Moon, R-Ash Grove, are behind a bill to repeal the tax increase.

The main point of contention for the increase is whether legislators worked around the Hancock Amendment to the Missouri Constitution. The amendment mandates that any proposed tax rate increase above a certain amount must go before voters.

The bills are HB1594 and SB782.

Florida

Florida Gov. Ron DeSantis announced before the first of the year that he would be pursuing a six-month gas tax holiday.

He said the relief is necessary to help offset rising fuel prices.

“Gas prices have been rising due to inflationary pressures from bad federal policies, so we here in Florida need to step up and provide relief to our citizens,” DeSantis said in a news release.

The tax holiday is touted to provide more than $1 billion in gas tax relief. He said it would save the average Florida family up to $200.

DeSantis did not set a date for when he’d like the relief to begin but said he would work with state lawmakers on specifics.

Ohio

An Ohio Senate bill would provide relief for truckers and motorists from a recent increase in fuel tax rates.

Three years ago, the Legislature approved a transportation budget deal that included raising the 28-cent fuel tax rate to 38.5 cents for gas and from 28 cents to 47 cents for diesel.

Sponsored by Sen. Stephen Huffman, R-Tipp City, SB277 would return the gas and diesel tax to the 2019 rate.

The rate reductions would begin no later than July 1, 2022. The tax rate would remain unchanged for five years.

The bill is in the Senate Transportation Committee.

Virginia

Multiple Virginia bills would revert and put on hold fuel rate changes.

In the lead-up to beginning his term as governor on Jan. 15, Glenn Youngkin has called for pressing the pause button on fuel tax rate increases.

Action underway at the statehouse pursues his goal. The first bill, SB541, would lower the tax rate on gas and diesel on July 1, 2022.

The tax rate on gas would be trimmed by a nickel from 26.2 cents to 21.2 cents. The diesel rate would be reduced from 27 cents to 20.2 cents.

The rates would be the same as they were prior to a July 1, 2021, rate increase.

The tax rates would revert to their current amounts on July 1, 2023, and be indexed to annual changes in the consumer price index beginning July 1, 2024.

The second bill, HB1059, would suspend collection of the state and regional taxes on gas and diesel until July 1, 2023.

Another bill, HB297, would suspend the imposition of any regional fuels tax in the state until July 1, 2023.

Each bill is in committee. LL

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