Fuel tax revisions in seven states
Price breaks on fuel tax rates are a hot topic this year at statehouses around the country. Despite the pursuits, some states have automatic tax increases that kicked in the first of July.
Automatic tax rate changes range from a 9-cent diesel tax increase in Connecticut to cost increases of about 2 cents in many states. Elsewhere, states have taken action to prevent scheduled increases.
California
Another round of fuel rate increases in California now are in effect. The increases are intended to keep up with inflation.
Excise tax collected on gas purchases has been set at 51.1 cents and the diesel rate at 38.9 cents. As of July 1, the gas rate is up 2.8 cents per gallon to 53.9 cents. The diesel tax is up 2.1 cents per gallon to 41 cents.
Gov. Gavin Newsom pursued a stop to the increases earlier this year but the attempt at the statehouse was unsuccessful.
The latest increase to fuel is part of a 2017 transportation funding deal that raised the excise tax on diesel by 20 cents and on gas 12 cents. Vehicle fee increases also were included in the funding deal.
The governor and legislative leaders did take action to provide some fuel tax relief for truck drivers.
The state’s budget for 2022-23 includes a pause in the state’s sales tax on diesel.
California collects a 3.9375% sales tax on diesel purchases.
The budget gives truck drivers a break from the additional fuel expense for one year.
The state will tap general fund money to cover the $327 million in lost revenue for transportation purposes.
Colorado
Colorado Gov. Jared Polis has signed into law a bill to delay an automatic fuel tax increase.
One year ago, the governor signed into law a massive transportation funding deal that included a new 2-cent-per-gallon fee on gas and diesel. The fuel tax increase was scheduled to take effect on July 1.
Polis said earlier this year that “now is not the time” to increase fuel taxes.
At the governor’s urging, state lawmakers approved delaying implementation of the new tax for six months, to Jan. 1.
Delaying implementation of the new fuel tax is estimated to result in a $29.9 million hit to state revenue.
Connecticut
Connecticut’s diesel tax rate is up. Due to wholesale fuel prices that have more than doubled over the past year, the 40.1-cent excise rate will increase by 9 cents to 49.2 cents per gallon for the next year.
Diesel in the state is taxed following an annual formula that includes a fixed base and an adjustment that takes into account the average wholesale diesel prices from the prior year.
There is no change to the gas tax. Gov. Ned Lamont and legislative leaders took action in March to suspend collection of the state’s 25-cent gas tax. The tax holiday is in effect until Dec. 1.
Illinois
Illinois Gov. J.B. Pritzker has signed a number of tax policy changes that include freezing the state’s 39.2-cent gas tax rate and 46.7-cent diesel rate.
A 2-cent cost-of-living adjustment set for July 1 is delayed for six months. Another increase is slated for July 2023.
Indiana
The state of Indiana’s fuel tax rates also are on the rise. A 2017 state law increased the gas and diesel rates by 10 cents to 28 cents. Tax rates also were indexed on an annual basis through 2024.
As a result, this year’s increase for gas is up one penny, to 33 cents. The diesel rate is up 2 cents, to 55 cents.
Kentucky
Kentucky Gov. Andy Beshear has acted to freeze the state’s fuel tax rates.
Statute links the state fuel taxes to the average wholesale price of fuel. As a result, when the price goes up, the tax rate follows.
The governor filed an emergency regulation to prevent a 2-cent increase to the state’s 26-cent tax rate and the 23-cent diesel rate set to take effect on July 1. The action will keep the taxes unchanged until at least January.
Maryland
Fuel tax rates in Maryland are on the rise. Specifically, the gas tax and the diesel tax each increased by 6.6 cents.
The action follows Gov. Larry Hogan in March signing into law legislation to suspend collection of the state’s fuel tax rates for 30 days, through April 16.
The July 1 changes are due to an 8-year-old inflation indexing law. Maryland law authorizes fuel tax rates to be adjusted each July based on the consumer price index.
As a result, the gas tax is up from 36.1 cents to 42.7 cents. The diesel tax rate increased from 36.85 cents to 43.45 cents.
Since the tax holiday ended in April, the governor and others have called for action to reinstate the tax break. The pursuit has stalled.
Missouri
In Missouri, the first of July marked the second of five annual increases to the state’s fuel tax rate.
A 2021 law put in place regular increases to the state’s then 17-cent fuel tax rate. The tax is slated to increase by 12.5 cents to 29.5 cents through July 2025.
The first 2.5-cent increase took effect last October. The second increase of the same amount took effect on July 1. The gas and diesel rates now are set at 22 cents.
South Carolina
The 26-cent diesel and gas excise rate collected in South Carolina is up one more time by 2 cents. The change to 28 cents follows a 2017 state law to impose increases of 2 cents annually through 2022. The final annual increase will set the tax rate at 28 cents.
The South Carolina Department of Transportation has collected about $900 million the first five years of the tax increase.
Virginia
Virginia’s gas rate is up. The 26.2-cent tax rate increased July 1 by 1.8 cents to 28 cents.
The 27-cent diesel rate was raised to 28.9 cents.
The tax rate changes are due to indexing to annual changes in the consumer price index. LL