States move on fuel tax holidays; others also pursue changes
In response to multiple factors three states have taken action in recent weeks to provide a fuel tax holiday for at least certain drivers. Officials in other states around the country also are pursuing action to do the same.
Maryland
Maryland Gov. Larry Hogan was the first governor to take action on a fuel tax holiday.
State law authorizes fuel rates to be adjusted each July based on the consumer price index. Since July 1, 2021, the gas tax has been set at 36.1 cents and the diesel rate at 36.85 cents.
The Republican governor signed into law legislation on March 18 to suspend collection of the state’s fuel rates for 30 days. The tax holiday took effect immediately and was set to run through April 16.
Suspending collection of fuel taxes is estimated to cost the state $100 million.
Advocates say the lost revenue would be covered by dipping into the state’s $7.5 billion budget surplus.
“This is, of course, not a cure-all, and market instability will continue to lead to fluctuations in prices, but we will continue to use every tool at our disposal to provide relief for Marylanders,” Hogan said at a news conference.
A legislative pursuit to extend the 30-day tax holiday was killed.
Georgia
Georgia Gov. Brian Kemp acted in mid-March to sign into law a tax holiday for his state.
Georgia collects a 29.1-cent gas tax and a 32.6-cent
diesel tax.
Legislation signed into law immediately suspended collection of the state’s fuel taxes through May 31.
The Republican governor said the state is in a good position to provide a tax break because of a $3.7 billion budget surplus through fiscal year 2021.
Connecticut
Connecticut Gov. Ned Lamont has also signed into law a bill to give motorists a three-month holiday from paying the state’s 25-cent excise tax on gas. The law does not affect the 41.1-cent excise tax on diesel.
The gas tax holiday began April 1 and runs through the end of the fiscal year, June 30.
Suspension of the gas tax for three months will cost the state $90 million.
Language included in the tax holiday bill is intended to ensure cost savings are transferred to customers. Failure by retailers to reduce the gas price by the full 25 cents per gallon during the suspension period would be considered an “unfair or deceptive trade practice.”
Some legislators, including Rep. Tom Delnicki, R-South Windsor, asked for the tax suspension to include diesel. The diesel tax provision did not have enough support.
The Democratic governor praised both parties for getting a deal done quickly.
“With this bipartisan action, we are taking steps to provide some relief to consumers as they face rising prices due to a number of international dynamics and market instability that go far beyond our state,” Lamont said in a news release.
Governors call for action
In California, Gov. Gavin Newsom has said he supports some relief from high fuel prices.
The Democratic governor supports a rebate plan. He also wants to pause a portion of the sales tax rate on diesel and suspend the inflationary adjustment on gas and diesel excise that is set for July 1.
Newsom suggested sending debit cards to drivers of gas-powered vehicles and electric-powered vehicles.
Colorado Gov. Jared Polis wants to reverse course on an upcoming fuel tax increase.
A 2021 transportation funding deal includes a new 2-cents-per-gallon fee on gas and diesel starting July1. Annual penny increases to the fee on gas and diesel are set to follow each year through 2028.
The Democratic governor said at a recent news conference that “now is not the time” to increase fuel taxes.
The legislature must approve his plans.
In Florida, state lawmakers have reached agreement on a gas tax holiday initially pursued by Republican Gov. Ron DeSantis.
The GOP-led Legislature approved a state budget that includes a one-month gas tax holiday. The holiday from collecting the 27-cent tax rate will be for the month of October. A portion of the state’s federal stimulus dollars will be used to cover the estimated $200 million in lost gas tax revenue.
Illinois Gov. J.B. Pritzker wants to freeze the state’s gas tax rate. Specifically, the 39.2-cent rate for gas would be frozen for one year.
In 2019, a $45 billion capital plan included a provision tying the state’s gas and diesel rates to inflation. Changes can be made each July.
Pritzker, a Democrat, said efficiency at the Illinois Department of Transportation would allow the agency to complete road projects on time and on budget without relying on additional gas tax revenue.
Mississippi Lt. Gov. Delbert Hosemann has announced pursuit of a fuel tax holiday. The state collects an 18.4-cent tax on gas and diesel purchases.
Hosemann, who presides over the Senate, said he will work with other state lawmakers to suspend the state’s fuel tax for six months.
The tax holiday is expected to reduce road revenue by $215 million. The Republican lieutenant governor said the state could tap a capital expense fund to cover the loss.
Other states pursue tax breaks
In Minnesota, one bill would suspend collection of the state’s excise tax on gas and diesel between Memorial Day and Labor Day.
Two Pennsylvania bills would suspend collection of the state’s gas and diesel taxes for six months.
An Alabama bill would undo an indexing rule for fuel taxes slated to take effect next year.
A New York bill would suspend collection of the state’s fuel taxes for one year.
One Ohio Senate bill would provide relief for truckers and motorists from a recent increase in fuel tax rates.
Three years ago, the legislature approved a transportation budget deal that included raising the 28-cent fuel tax rate to 38.5 cents for gas and from 28 cents to 47 cents for diesel.
The bill would return the gas and diesel tax to the 2019 rate.
The rate reductions would begin no later than July 1. The tax rate would remain unchanged for five years.
A Rhode Island Senate bill would eliminate collection of the state’s fuel tax through the end of this year.
In South Carolina, a House resolution calls for suspending the gas and diesel tax. The tax rate is scheduled to increase 2 cents on July 1. The measure calls for a one-year tax holiday.
Two Tennessee House lawmakers are calling on Gov. Bill Lee to place a 90-day moratorium on the state’s collection of gas and diesel taxes.
Nashville Democratic Reps. John Ray Clemmons and Bo Mitchell wrote in a letter to the Republican governor the moratorium could be accomplished in multiple ways: the budget implementation bill, stand-alone legislation, or via executive order.
IFTA effect
Pursuit at statehouses for fuel tax holidays that include diesel have drawn the attention of the trucking industry.
Professional drivers want to know what a tax break would mean for paying their fuel tax through the International Fuel Tax Agreement.
IFTA Executive Director Carmen Martorana recently told Land Line Media that drivers wouldn’t have to pay state fuel tax if they are buying and burning the fuel in a state that is not collecting the tax.
However, drivers who buy fuel in a state with a fuel tax exemption and drive in a state without an exemption would have to pay that tax out of pocket, she pointed out.
She added that if a driver pays taxes on fuel in one state but then drives in a state that has a tax holiday, they can get reimbursed.
Tax holiday pursuit shot down
Despite the trend nationally in statehouses to pursue fuel tax relief for at least some consumers, the idea is not taking hold in multiple states.
In Arizona, Gov. Doug Ducey said he prefers a long-term fix to a fuel tax holiday. The Republican governor said expanding energy production is a better solution.
Republican leaders at the Iowa statehouse cite potential financing delays in getting road work done for not taking action.
The Massachusetts Senate shot down a Republican proposal to pause fuel tax collections through Labor Day.
Majority Democrats said they are opposed to the plan and raised concerns about violating the terms of the state’s bond agreements.
Gov. Charlie Baker has not endorsed a break in fuel taxes. The Republican governor has expressed concern about how tax breaks in nearby states could “disadvantage” Massachusetts drivers.
Michigan Gov. Gretchen Whitmer vetoed a bill that would suspend the state’s 27-cent tax on gas and diesel for six months.
Instead, the Democratic governor wants to address the state’s collection of sales tax on fuel purchases. Specifically, she wants to suspend the state’s 6% sales tax on gas and diesel.
Governors call for federal action
Six Democratic governors have called on Congress to act to suspend collection of the federal gas tax through the end of this year.
The governors of Colorado, Michigan, Minnesota, New Mexico, Pennsylvania and Wisconsin say general fund money could be used to cover lost gas tax revenue.
“At a time when people are directly impacted by rising prices on everyday goods, a federal gas tax holiday is a tool in the toolbox to reduce costs for Americans, and we urge you to give every consideration to this proposed legislation,” the governors wrote to congressional leaders. LL
Land Line Now Senior Correspondent Ashley Blackford contributed to this report.