January fuel tax rate changes
States across the country are welcoming the new year with changes in fuel tax rates.
More than a dozen states applied changes over the past year. Changes ranged from a 3.2-cent increase on Connecticut diesel to a 2.3-cent decrease on Kentucky gas and diesel.
As of Jan. 1, modest changes of likely one penny or less are anticipated in states that include Alabama, Florida, Georgia, Michigan, Nebraska, New York, North Carolina, Pennsylvania and West Virginia. The changes are based on automatic adjustments.
The biggest increase will take place in Minnesota. Its gas and diesel tax rates are set to increase by 3.3 cents.
In California, anticipated amendments to the state’s Lower Carbon Fuel Standard could significantly raise fuel prices in 2025. As of press time, the exact amount had yet to be made public by the California Air Resources Board.
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.
Automatic adjustments are implemented annually in some states and change more frequently in others.
The Transportation Investment Advocacy Center reports there are 23 states with variable-rate state fuel taxes.
Rate changes are calculated monthly, 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