Fuel tax relief pursued in 10 states

February 8, 2022

Keith Goble

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It is about one month into regular state legislative sessions around the country, and the list of states with legislation to change how much fuel tax is collected continues to grow.

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

California Gov. Gavin Newsom wants to freeze the state’s fuel tax rates. The tax freeze is part of his 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 is 38.9 cents.

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.

“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 legislative proposal would take an extra step.

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

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 bill could be heard in committee as early as this week.

Colorado

Colorado Gov. Jared Polis wants to reverse course on an upcoming fuel tax increase.

In 2021, he signed into law a massive transportation funding deal that includes a new 2-cents-per-gallon fee on gas and diesel

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 last month at a news conference.

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

The legislature must approve his plans.

Florida

In Florida, Gov. Ron DeSantis is pursuing a gas tax holiday that is touted to provide more than $1 billion in tax relief.

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

The governor said inflationary pressures from “bad federal policies” have led to higher prices at the pump. He said the state needs to step up and provide relief for citizens.

“I am proposing a $1 billion gas tax holiday to help reduce prices at the pump,” DeSantis announced during his state of the state speech.

The tax holiday would begin on July 1.

State lawmakers appear reluctant to pursue the governor’s tax cut. House and Senate budget plans recently released do not include his proposal.

One House bill, however, would freeze fuel tax rates.

Sponsored by Rep. Andrew Learned, D-Hillsborough, the bill would remove annual indexing of fuel sales tax rates.

Florida fuel rates are adjusted each Jan. 1 based on the national consumer price index. One month ago, gas and diesel rates each increased by one-half cent.

The bill, HB6083, awaits consideration in committee.

Illinois

During his state of the state address, Illinois Gov. J.B. Pritzker laid out his plans for the upcoming budget. One component is to freeze the state’s gas tax rate.

Specifically, the 39.2-cent rate for gas would be frozen for one year.

In 2019, a $45 billion capital plan included a provision tying the state’s gas and diesel rates to inflation. Changes can be made each July.

Pritzker said efficiency at the Illinois Department of Transportation will allow the agency to complete road projects on time and on budget without relying on additional gas tax revenue.

Multiple bills introduced at the statehouse would provide relief at the pump for many drivers.

HB4977 would cut the gas tax rate to 19 cents per gallon. The inflationary change also would be frozen.

The tax on diesel fuel would not be frozen. Instead, the 46.7-cent diesel excise tax would be increased by 2.5 cents to 49.2 cents.

HB5146 would freeze gas and diesel rates for six months if the average pump price places Illinois fuel prices in the top 10% among all states.

HB5215 would suspend annual inflationary adjustments of the gas tax for two years.

HB5481 would suspend inflationary adjustments of fuel if the percentage increase is more than 3% over the previous 12-month period. Money from the state’s general fund revenue would be used to cover lost revenue for the road fund.

Ohio

Ohio Gov. Mike DeWine is urging state lawmakers to not pursue lowering the state’s fuel tax rates.

One 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.

Huffman said money coming into Illinois from the recently passed federal infrastructure law would offset the $1.5 billion annual revenue loss. He said the federal money would result in a $2.3 billion annual boost for the state.

DeWine said last month any plan to lower fuel tax rates would be “a mistake.”

Virginia

In Virginia, Gov. 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.

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

Elsewhere, state legislators are taking the lead on efforts to provide relief at the fuel pump.

Maryland

Bills in both chambers of the Maryland General Assembly would 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. Since July 1, 2021, the gas tax has been set at 36.1 cents and the diesel rate at 36.85 cents.

HB144/SB337 would repeal the rule for annual adjustments.

Delegate Matt Morgan, R-St. Mary’s, told the House Ways and Means Committee increasing fuel prices makes the change necessary.

“Our constituents are having an enormous increase for everything from the price of gas to food on grocery shelves,” Morgan said. “At this time, it would be helpful to pass tax relief onto consumers – the ones who need it the most.”

The Senate Budget and Taxation Committee today is scheduled to discuss SB337.

The House Ways and Means Committee is scheduled to discuss a separate bill on Feb. 16 to provide a tax holiday for gas and diesel purchases.

HB577 would trim the gas and diesel rate by 15 cents for six months starting July 1.

Missouri

Multiple Missouri legislators want to reverse course on a recent fuel tax increase.

A 2021 law raises 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 legislation 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.

According to a fiscal note attached to the House version, eliminating the initial 2.5-cent tax increase would result in a loss of $190 million in fiscal year 2023.

The bills are HB1594 and SB782.

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, is behind 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 and increased the diesel rate by 10 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.”

Washington

One Washington state lawmaker wants to provide a yearlong reprieve from state fuel taxes.

Sen. Simon Sefzik, R-Ferndale, has introduced a bill to suspend the 49.4-cent fuel rate through the end of the year.

To make up for lost revenue, SB5897 would use funds from the state’s $8 billion surplus. Specifically, $1.3 billion would be transferred from the general fund to the state transportation account.

“The state has so much money right now that the legislature probably would have trouble spending it all,” Sefzik stated. “Well, I’m saying we shouldn’t. We should give some of it back to the taxpayers, in the form of lower gas prices, at a time when it could really make a difference.” LL

More state trends

Keith Goble, state legislative editor for Land Line Media, keeps track of many trends among statehouses across the U.S. Here are some recent articles by him.

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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.