Five states consider changes, extension to fuel tax rules

March 18, 2024

Keith Goble


A mix of fuel tax changes are under consideration at statehouses from California to New Jersey.

In California, an Assembly bill is intended to provide some relief at the fuel pump.

The state charges a 57.9-cent excise tax on gas and a 44.1-cent rate on diesel.

California’s average diesel price is about $1.35 above the national average for a gallon of on-highway diesel fuel, according to AAA. The state’s average gas price is about $1.46 above the national average for a gallon of regular gas.

The state is authorized to adjust fuel tax rates each July by a percentage amount equal to the increase in the California Consumer Price Index, as calculated by the California Department of Finance.

Assembly Republicans have introduced a bill that would authorize the governor to suspend an adjustment to the fuel tax “upon making a determination that increasing the rate would impose an undue burden on low-income and middle-class families.”

The earliest the rule would be implemented would be July 2025.

The bill, AB3005, is in the Assembly Transportation Committee.


One Illinois House bill would expand fuel tax collection options for local governments beyond the Chicago area.

State law permits DuPage, Kane, Lake, McHenry and Will counties to impose a county motor fuel tax. Revenue must be dedicated for transportation purposes.

HB4428 would expand authorization for local fuel tax collection to any county in the state. The bill states that proceeds from the tax must be used for the purpose of maintaining and constructing “essential transportation-related infrastructure.”

The bill is in the House Rules Committee.


In Mississippi, a House bill would open the door to local fuel tax collection in the state’s capital city.

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

HB380 would authorize the city of Jackson to impose a penny excise tax on gas and diesel purchases.

Local voters would get the final say on whether to impose a municipal tax.

Revenue would be dedicated for local roads, streets and bridges.

The bill is in the House Ways and Means Committee.


A three-year-old Missouri law will increase the 17-cent fuel tax rate by 12.5 cents to 29.5 cents over five years. A fuel tax rebate program is available for many residents.

The first installment of annual 2.5-cent increases took effect in October 2021. The second and third installments took effect July 1, 2022 and July 1, 2023.

The tax rate now is set at 24.5 cents for gas and diesel purchases.

Additional 2.5-cent increases will take effect July 1, 2024 and July 1, 2025.

Missouri residents are able to go through a refund process for the additional fuel tax collection. Refunds, however, are limited to owners of vehicles weighing up to 26,000 pounds.

The House Transportation Accountability Committee voted 10-3 to advance a bill that would remove the weight limitation. As a result, Missouri-based truck operations would be allowed to take advantage of the refund offering.

The fiscal note attached to the bill reports that allowing only Missouri-based carriers to be eligible for refunds for vehicles over 26,000 pounds “may create an unfair interstate commerce practice.”

Sponsored by Rep. Don Mayhew, R-Crocker, HB2072 also would synch the refund process with the tax year and not the fiscal year, as is used in the current rule.

A Senate bill, SB1214, also includes a provision to remove the 26,000-pound weight limit for refund offerings.

New Jersey

Two identical New Jersey bills continue to support transportation funding in the state via regular fuel tax increases.

Each October, the state revises gas and diesel rates to adjust for any revenue shortage or surplus during the prior fiscal year. Last fall, the tax setup resulted in a fuel tax increase of about a penny.

The annual tax revision is the result of a rule that requires a steady stream of revenue to support the state’s Transportation Trust Fund. Statute 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 fund is required to provide $1.6 billion annually to support infrastructure work.

The current tax setup is scheduled to sunset this summer.

Two bills moving through their respective chambers would extend the tax setup with changes.

A4011/S2931 would reauthorize the Transportation Trust Fund for another five years.

The fund would be required to spend $2 billion annually on transportation projects – an increase from current law. Additionally, the amount would be raised each year starting in 2027.

The increases would be divided equally between local, county, New Jersey Transit and state Department of Transportation projects.

The legislation also would raise fuel tax collections and create a new annual registration tax on zero-tailpipe-emission vehicles.

Assemblyman Christopher DePhillips, R-Bergen, is among lawmakers at the statehouse who do not support the extension. He said the current setup has not met expectations.

“We all support robust funding for transportation projects. But our residents want and deserve to see return on investment,” DePhillips said in prepared remarks.

If signed into law, the extension would result in a 1.9-cent-per-gallon fuel tax increase each year through July 2028. At that time, the gas rate would increase from 42.3 cents to 51.8 cents, and the diesel rate would increase from 49.3 cents to 58.8 cents.

Also included is a provision to add a flat $250 annual fee on electric vehicle registrations. The amount would be increased by $10 each July until 2028. At that time, the annual fee would reach $290. LL

More Land Line coverage of state news is available.