Fuel tax rate changes in effect Jan. 1

December 21, 2021

Keith Goble

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States from coast to coast are ringing in the new year with changes in fuel tax rates.

About a dozen states applied changes over the past year ranging from a 6.8-cent-per-gallon increase for diesel in Virginia to a 4.5-cent rate drop for diesel in Connecticut.

The biggest change was implemented in New Jersey. On Oct. 1, an 8.3-cent decrease in the state’s fuel tax rates went into effect.

The rate drop is tied to a state law to regularly raise the stream of revenue to support the New Jersey Transportation Trust Fund. The rule requires the state treasurer to adjust the tax rate each year to ensure it brings in revenue needed to pay the bills for transportation work.

The change is in sharp contrast to the prior year’s 9.3-cent hike attributed to tax revenue falling below projections. At the time, officials blamed the pandemic for the revenue shortfall.

New Jersey’s tax on diesel now is 49.4 cents per gallon, and the gas rate is 42.4 cents.

Michigan joins the higher fuel tax list

New for 2022, a tax increase seven years in the making is found in Michigan.

Starting Jan. 1, the state’s fuel taxes will be linked to inflation. In 2015, then-Gov. Rick Snyder signed into law a bill to increase the state’s fuel rates over multiple years.

The first increase took effect in 2017 when the 19-cent gas tax and 15-cent diesel tax increased to 26.3 cents. As of 2022, the tax rates also are linked to the consumer price index. The distinction allows tax collections to increase with inflation.

Additional adjustments will occur each January. The first adjustment is estimated to raise fuel rates by about one penny.

Oregon

As of the first of year, another round of fuel rate increases can be found in Oregon.

The state’s 36-cent gas tax will increase by 2 cents to 38 cents.

The rate increase marks the third of four increases included in a 2017 transportation funding bill inked by Gov. Kate Brown.

The gas tax has since increased 2 cents every two years. The final 2-cent increase is slated for 2024. At that time, the gas tax rate will reach 40 cents.

For professional drivers, proportionate increases are applied to the weight-mile tax.

North Carolina

One year after the North Carolina Legislature acted to freeze the state’s 36.1-cent fuel excise rate due to the pandemic, the tax is set to increase.

The state’s tax is indexed to a weighted average of energy inflation.

To avoid an expected decrease of about one penny, state lawmakers imposed a temporary floor on the fuel excise rate that prevented the rate from dropping.

The change was estimated to increase revenue by $53.6 million over two years.

The floor has since expired. As a result, the fuel rate will increase on Jan. 1 by 2.4 cents to 38.5 cents.

Nebraska

Starting Jan. 1, a fuel tax decrease will be implemented in Nebraska.

The 27.7-cent gas and diesel excise rate will drop by 2.9 penny to 24.8 cents. The change is due to a law linking the state rates to the price of fuel.

The state tax is made up of three components: the variable tax, fixed tax and wholesale tax. The variable and wholesale rates are adjusted twice annually. A separate petroleum release remedial action fee is not included in the state tax rates.

The decrease in the state’s tax rates is a result of declining fuel prices and a six-month adjustment in the wholesale tax rate.

Another recalculation is set for July 1, 2022.

Changes elsewhere

Modest changes of one penny or less are in states that include Florida, Georgia, New York, Pennsylvania, Utah, and West Virginia. The changes are based on automatic adjustments.

Automatic adjustments

Automatic adjustments are set up in multiple ways. One method is to calculate the tax by percentage of fuel price at the wholesale level. A related method is to use a combination of percentage of fuel price and a flat excise tax. Another method is to link fuel prices to inflation, such as the consumer price index.

Some states with automatic adjustments are implemented annually while others change more frequently.

According to the Transportation Investment Advocacy Center, with the addition of Michigan there are 20 states with variable-rate state fuel taxes.

The changes are calculated each month, quarterly, every six months, annually, or every two years.

The state of Indiana updates its fuel rates each month. In Vermont, fuel rates are updated quarterly. Tax rates in Alabama and Rhode Island are revised every two years. Nebraska revises its tax rate every six months.

Annual updates are made in Arkansas, California, Connecticut, Florida, Georgia, Illinois, Indiana, Kentucky, Maryland, Michigan, New York, North Carolina, Pennsylvania, Utah, Virginia and West Virginia. LL

 

Lucas Oil

Keith Goble has been covering trucking-related laws since 2000. His daily web reports, radio news and “OOIDA’s State Watch” in Land Line Magazine are the industry’s premier sources for information regarding state legislative affairs.