Fuel tax rate changes now in effect across the country

States across the country welcomed the new year with changes in fuel tax rates.

More than a dozen states applied changes in 2024. Changes ranged from a 3.2-cent increase on Connecticut diesel to a 2.3-cent decrease on Kentucky gas and diesel.

Jan. 1 changes

As of Jan. 1, modest changes of about one penny or less were implemented in states that include Florida, Georgia, Michigan, Nebraska, New York, North Carolina and Vermont. The changes were based on automatic adjustments.

Pennsylvania and West Virginia are two more states eligible for rate changes via automatic adjustments, but rates in both states have continued unchanged into 2025.

States with more notable fuel tax rate changes are below.

Minnesota

The biggest increase took place in Minnesota. A 2023 state law indexed to inflation the gas and diesel excise tax rates. The rule allows for annual rate changes. As a result, the 28.5-cent excise rate increased by 3.3 cents to 31.8 cents at the first of the year.

New Jersey

A new Garden State rule now in effect allows for increasing fuel taxes to keep pace with revenue targets to pay for transportation infrastructure.

Fuel tax rates in New Jersey are comprised of two components: the petroleum products gross receipts tax and the excise tax.

The 31.8-cent petroleum tax applied to gas increased 2.6 cents to 34.4 cents per gallon. The 35.8-cent petroleum tax added to diesel also increased by 2.6 cents to 38.4 cents.

Combined with the fixed rate 10.5-cent motor fuels tax, the total state tax applied to gas purchases is at 44.9 cents per gallon. Including the 13.5-cent motor fuels tax collected on diesel, the total state diesel tax is 51.9 cents.

Utah

The state of Utah is included on the list of states with annual rate changes. The 36.5-cent gas and diesel tax rates increased 2 cents to 38.5 cents.

Since the start of 2024, the state’s fuel tax rates have been based on a formula that uses the statewide average motor fuel rack price for the previous three fiscal years.

California

In California, amendments to the state’s Low Carbon Fuel Standard are anticipated to significantly raise fuel prices in 2025.

The state’s Air Resources Board adopted amendments to the fuel standard to help achieve carbon and methane emission targets.

The agency projected the changes would increase the price of gas by 47 cents per gallon. Diesel prices were anticipated to rise by 59 cents per gallon.

CARB officials have since backed away from the estimates. In October, officials wrote their analysis “should not be misconstrued as a prediction of the future credit price nor as a direct impact on prices at the pump.”

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. Another method is to link fuel prices to inflation, such as the consumer price index. The National Highway Construction Cost Index is another method used.

Some states with automatic adjustments are implemented annually, while others change more frequently. The National Conference of State Legislatures has reported there are 24 states with variable-rate state fuel taxes.

Rate changes are calculated every 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, Colorado, Connecticut, Florida, Georgia, Illinois, Indiana, Kentucky, Maryland, Michigan, Minnesota, New York, North Carolina, Pennsylvania, Utah, Virginia and West Virginia. LL