Fuel tax rate changes for new year
States from Utah to Florida are ringing in the new year with changes in their fuel tax rates.
Modest changes of likely one penny or less are expected in states that include Florida, Georgia, Nebraska, New York, North Carolina, Pennsylvania, Utah and West Virginia. The changes are based on automatic adjustments.
Michigan joins the list
A tax increase seven years in the making goes into effect 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 were 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.
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. A third way 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.
Additionally, 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