Fuel tax relief pursued in at least 18 states

March 16, 2022

Keith Goble

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State officials from coast to coast are deciding whether to provide price breaks on fuel tax collections. None of the measures that would affect diesel tax collections mention how the International Fuel Tax Agreement would be affected.

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.

Alabama

One Alabama state senator wants to revisit a 3-year-old fuel tax increase.

In 2019, Gov. Kay Ivey signed into law a bill to increase fuel tax rates by 10 cents over three years to 28 cents for gas and to 29 cents for diesel.

Starting next year, the rule also authorizes the state’s excise tax rates to be indexed. Specifically, the tax rates can be adjusted up to one penny annually.

Sen. Larry Stutts, R-Tuscumbia, has introduced a bill to undo the indexing provision. His bill, SB277, is in the Senate Finance and Taxation Committee.

The Republican governor has said she is opposed to any change in fuel tax collection at the state level. She says the taxation issue needs to be addressed at the federal level.

 

California

Work continues at the California statehouse to give a tax break for at least certain drivers.

Gov. Gavin Newsom has called for freezing 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, the minority party in the legislature, are calling for the governor to do more. Meanwhile, they are pushing their own plans to address tax relief.

The first bill, would completely suspend collection of the gas tax 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 gas tax holiday would cut prices by 50 cents a gallon overnight, and with the surplus we have, there’s no reason we can’t ease drivers’ pain at the pump,” Assembly Republican Leader James Gallagher of Yuba City said in a news release.

The Senate voted Tuesday against an attempt to fast-track the bill for consideration on the chamber floor. The bill, introduced in January, has not been sent to a committee.

Another 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.

The legislature must approve his plans.

Governors call for federal action

Polis is one of six Democratic governors to call on Congress to act to suspend collection of the federal gas tax through the end of this year.

The governors of Colorado, Michigan, Minnesota, New Mexico, Pennsylvania, and Wisconsin say general fund money could be used to cover lost gas tax revenue.

“At a time when people are directly impacted by rising prices on everyday goods, a federal gas tax holiday is a tool in the toolbox to reduce costs for Americans, and we urge you to give every consideration to this proposed legislation,” the governors wrote to congressional leaders.

Connecticut

Connecticut Gov. Ned Lamont this week is calling for the state’s 25-cent gas tax to be cut through June. The state’s diesel tax would be unaffected.

The Democratic governor said there is “strong consensus” between the state’s Republican and Democratic parties to provide consumers with relief from soaring gas prices.

Republican leaders at the statehouse last week called for a temporary suspension of the state’s 26.4-cent-per-gallon gross receipts tax on gas.

Legislative leaders say it is possible legislation to address the issue could be approved before the end of March.

 

Florida

In Florida, state lawmakers have reached an agreement on a gas tax holiday initially pursued by Gov. Ron DeSantis.

The GOP-led Legislature approved a state budget that includes a one-month gas tax holiday. The holiday from collecting the 27-cent tax rate will be for the month of October.

A portion of the state’s federal stimulus dollars will be used to cover the estimated $200 million in lost gas tax revenue.

DeSantis, a Republican, wanted a six-month gas tax holiday to provide more than $1 billion in tax relief.

Georgia

Georgia lawmakers are nearing approval of a bill to temporarily suspend collection of the state’s fuel taxes.

The state now collects a 29.1-cent gas tax and a 32.6-cent diesel tax.

The Senate Finance Committee voted Tuesday to advance a bill to the chamber floor to suspend tax collection through May 31. House lawmakers voted last week by unanimous consent to endorse the plan.

Gov. Brian Kemp says once HB304 arrives on his desk he will sign it into law. The Republican governor said the state is in a good position to provide a tax break because of a $3.7 billion budget surplus through fiscal year 2021.

 

Illinois

Illinois Gov. J.B. Pritzker wants 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.

One Senate bill, SB4195, would cap the sales tax collected on gas at 18 cents per gallon.

The state collects two taxes on fuel: a motor fuel tax and a sales tax.

The motor fuel tax is a flat tax that does not change. The sales tax is proportional to the price of fuel.

Maryland

Maryland Gov. Larry Hogan and state lawmakers have reached agreement on a fuel tax holiday.

State 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.

HB1486/SB1010 would suspend collection of the state’s fuel rates for 30 days.

Suspending collection of fuel taxes is estimated to cost the state $100 million.

Advocates say the lost revenue would be covered by dipping into the state’s $7.5 billion budget surplus.

The fuel tax holiday legislation is expected to be on the governor’s desk by midweek.

 

Massachusetts

In Massachusetts, House Republicans were unsuccessful in getting their counterparts on the other side of the aisle to go along with a plan to suspend collection of the state’s fuel tax.

Rep. Peter Durant, R-Spencer, offered an amendment to the governor’s $1.6 billion supplemental budget to suspend collection of the 24-cent tax when the pump price is above $4 per gallon.

Critics said a tax freeze could cause harm to the state’s bond rating and would reduce available funds for road work.

Republican Gov. Charlie Baker said this week he has the same concern. Baker previously said he might look at providing some relief from the state’s fuel tax as an option to ease the impact of inflation on Massachusetts residents.

Michigan

Michigan Gov. Gretchen Whitmer is among the six Democratic governors to call for Congress to suspend collection of the federal gas tax through the end of the year.

However, she appears to have no interest in modifying her state’s fuel tax rate.

Senate lawmakers voted 24-14 on Tuesday to suspend the state’s 27-cent tax on gas and diesel for six months. The House last week voted 69-39 in favor of the tax holiday bill.

The tax break in HB5570 is estimated to save drivers about $750 million from April through September.

Multiple House Republicans say the state needs to take control on the issue of fuel prices.

“The way I look at it, we can wait for the federal government to take action, or we can take action ourselves at the state level,” stated Rep. Rodney Wakeman, R-Saginaw Township. “I would rather be proactive and help Michigan drivers by lowering the cost they pay at the pump as soon as possible.”

The bill now heads to the governor’s desk for an expected veto.

Whitmer’s office says she is always looking to lower costs and save drivers money.

“Right now, the best way to bring down the price of gas without impacting our ability to fix the damn roads is by suspending the federal gas tax,” a statement reads.

Minnesota

A pursuit at the Minnesota statehouse would suspend collection of the state’s 28.5-cent excise tax on gas on diesel.

Identical bills in both legislative chambers call for a three-month tax holiday between Memorial Day and Labor Day.

Rep. Zack Stephenson, DFL-Coon Rapids, said the suspension would result in about $200 million in lost tax revenue for the state. The bill’s House sponsor said the state could replace the revenue with a portion of the state’s projected $7.7 billion budget surplus.

Gov. Tim Walz has not weighed in on the tax holiday. He is among the group of Democratic governors to call on Congress for a federal gas tax holiday.

Both bills, HF4960/SF3938, are in committee.

Mississippi

Mississippi Lt. Gov. Delbert Hosemann announced on Monday his pursuit of a fuel tax holiday.

The state collects an 18.4-cent tax on gas and diesel purchases.

Hosemann, who presides over the Senate, said he will work with other state lawmakers to suspend the state’s fuel tax for six months.

The tax holiday is expected to reduce road revenue by $215 million. The Republican lieutenant governor said the state could tap a capital expense fund to cover the loss.

On Tuesday, the Senate Finance Committee voted to advance an amended bill that includes the six-month fuel tax suspension.

HB531 awaits further consideration in the Senate. If approved there, it would head back to the House for approval of changes before it could move to the governor’s desk.

Missouri

In Missouri, multiple bills 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.

Multiple bills call for repealing 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.

 

A separate effort would authorize a six-month tax holiday on gas and diesel purchases.

Sponsored by Rep. Adam Schwadron, R-St. Charles, HB2801 would cease fuel tax collection from July through December.

A fiscal note attached to the bill shows the tax holiday would result in $454 million in lost revenue.

Schwadron says the state could use federal funds made available to the state to cover the lost fuel tax revenue.

New York

One New York state lawmaker wants to suspend collection of the state’s fuel taxes.

The Empire State now collects a 48.22-cent tax on gas and a 46.98-cent tax on diesel.

Assemblyman Angelo Santabarbara, D-Rotterdam, is behind a bill to cease tax collection for one year.

“For a semitruck driver who fills up two standard size 150-gallon tanks once a day, the weekly savings would be $986.58,” Santabarbara stated. “Over the span of a year, the savings per truck would be $51,302.16.”

A9503 is in committee. The Senate version, S8526, also is in committee.

Sen. Peter Oberacker, R-Schenevus, has introduced a bill to suspend gas and diesel tax collection until Sept. 1.

S8483 is in the Senate Budget and Revenue Committee.

Advocates for a tax holiday say the state’s surplus could be used to absorb the lost revenue.

Ohio

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 Ohio 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.

Gov. Mike DeWine has urged state lawmakers to not pursue lowering the state’s fuel tax rates. The Republican governor has said any plan to lower fuel tax rates would be “a mistake.”

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.

Democratic Gov. Dan McKee has said he is open to considering the option.

South Carolina

A group of South Carolina state lawmakers have introduced a resolution to suspend the 26.75-cent gas and diesel tax.

The tax rate is scheduled to be increased another 2 cents on July 1.

H5103 calls for a one-year tax holiday.

Tennessee

Two Tennessee House lawmakers are calling on Gov. Bill Lee to place a 90-day moratorium on the state’s collection of gas and diesel taxes.

The state charges a 27.4-cent tax on gas and a 28.4-cent tax on diesel.

Nashville Democratic Reps. John Ray Clemmons and Bo Mitchell wrote in a letter to the Republican governor the moratorium could be accomplished in multiple ways: the budget implementation bill, stand-alone legislation, or via executive order.

“We are uniquely positioned, as state leaders, to provide a bit of relief in the form of eliminating all or a portion of our gas and diesel taxes for the requested period of time,” the letter reads.

The legislators add that the state is “fiscally sound” to absorb any budgetary gaps created by the tax moratorium.

Earlier in the regular session, Rep. Bruce Griffey, R-Paris, introduced a bill to provide truck drivers and others fueling in the state some relief at the fuel pump.

His bill, HB1650, would 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, funds would be rerouted 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 bill has remained in committee since mid-January.

Elsewhere

Despite the trend nationally in statehouses to pursue fuel tax relief for at least some consumers, the idea is not taking hold in Arizona and Iowa.

Arizona Gov. Doug Ducey said he prefers a long-term fix to a fuel tax holiday. The Republican governor said expanding energy production is a better solution.

Republican leaders at the Iowa statehouse cite potential financing delays in getting road work done for not taking action.

Instead, House Speaker Pat Grassley, R-New Hartford, says the federal government should take the lead on addressing fuel prices. 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.

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.