Fuel tax relief pursued in at least 10 states

February 24, 2022

Keith Goble

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State officials across the country are pursuing efforts to provide price breaks on fuel tax collections.

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 Democratic 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.

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.

Democratic leaders at the statehouse say they are reluctant to move forward with Newsom’s plan. They cite concerns about jeopardizing jobs, stunting economic growth, and slowing transportation work.

Republicans have accused their counterparts at the statehouse of being “tone deaf” about higher fuel prices.

Multiple GOP bills follow Newsom’s lead to address fuel tax relief.

The first bill, would 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.

A second bill, AB1626, would cap annual adjustments to fuel taxes at 2%.

One more bill, SB1156, would end annual fuel tax rate adjustments.

Colorado

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

A year ago 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.

The Democratic governor said at a recent news conference that “now is not the time” to increase fuel taxes.

“Let’s show people relief at the pump,” Polis said.

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

The legislature must approve his plans.

Florida

In Florida, Gov. Ron DeSantis wants a gas tax holiday that he says would provide more than $1 billion in tax relief.

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

The Republican 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.

Plans moving forward at the Republican-led statehouse would provide a wide range of tax breaks, but not at the fuel pump. One reason cited is that many drivers who would benefit from the fuel tax break do not reside in the state.

DeSantis says he will continue to work with legislative leaders to advance the fuel tax holiday.

One House Democrat has introduced a bill to freeze fuel tax rates.

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

Illinois Gov. J.B. Pritzker recently 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, a Democrat, said efficiency at the Illinois Department of Transportation would allow the agency to complete road projects on time and on budget without relying on additional gas tax revenue.

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

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

The Republican governor has said any plan to lower fuel tax rates would be “a mistake.”

Virginia

In Virginia, Republican Gov. Glenn Youngkin has called for pressing the pause button on fuel tax rate increases.

The Democrat-led Senate blocked legislation to lower the tax rate on gas and diesel on July 1.

The first bill, SB541, called for trimming the gas tax from 26.2 cents to 21.2 cents. The diesel rate would have been reduced from 27 cents to 20.2 cents.

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

The tax rates would have reverted to their current amounts after two years. The rates would have been indexed to annual changes in the consumer price index beginning July 1, 2024.

One bill, HB297, in the GOP-led House would suspend the imposition of any regional fuels tax in the state until July 1, 2023. It has also been sidelined.

Legislative efforts to cut fuel taxes

In other states, legislators have taken 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 that 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.”

Another House bill would 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.

Each bill has had a hearing.

Two more bills, HB1191/SB737, would freeze the fuel tax rates through June 2024. The bills have hearings scheduled in March.

Missouri

In Missouri, one bill moving forward at the House would reverse course on a recent fuel tax increase.

Republican Gov. Mike Parson a year ago signed into law a bill that 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.

The House Special Committee on Government Oversight voted to advance 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.

According to a fiscal note attached to HB1594, eliminating the initial 2.5-cent tax increase would result in a loss of $190 million in fiscal year 2023.

Rep. Sara Walsh, R-Ashland, said her legislation is worth considering due to the state’s current budget surplus.

The bill awaits further House consideration. The Senate version is SB782.

Another Senate bill, SB1149, introduced this month would eliminate the gas and diesel tax increase.

Rhode Island

Rhode Island Senate Republicans have introduced a bill to eliminate collection of the state’s fuel tax through the end of this year.

The state collects a 34-cent tax on gas and diesel purchases.

Advocates say the tax holiday would save residents $150 million at a time when inflation is skyrocketing.

The bill is S2305.

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 failed effort at the Washington statehouse sought to provide a yearlong reprieve from the state’s 49.4-cent fuel rate.

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

Sen. Simon Sefzik, R-Ferndale, said the state has “so much money right now” that they should give some of it back in the form of lower fuel prices.

The bill failed to advance from committee before a deadline, effectively killing it for the year. 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.