Maryland, Georgia approve fuel tax holidays; others pursue similar action

March 21, 2022

Keith Goble

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State officials from California to Maryland are taking steps to provide price breaks on fuel tax collections.

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.

On Friday, March 18, the Republican governor signed into law legislation to suspend collection of the state’s fuel rates for 30 days. The tax holiday took effect immediately.

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 bipartisan action will provide some relief from the pain at the pump and it is possible because of the prudent fiscal steps we have taken, which have resulted in a record budget surplus,” Hogan said at a news conference.

“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.”

Georgia

Shortly after the Maryland governor enacted a fuel tax holiday, Georgia Gov. Brian Kemp did the same in his state.

Georgia collects a 29.1-cent gas tax and a 32.6-cent diesel tax.

Legislation signed into law immediately suspends 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.

 

California

In California, Assembly Democrats last week announced a plan to help residents combat high gas prices.

A group of 21 Assembly members want to tap into the state’s budget surplus to send rebate checks to all California taxpayers. The proposed amount for each taxpayer is $400.

“We believe a rebate is a better approach that suspending the gas tax – which would severely impact funding for important transportation projects and offers no guarantee that oil companies would pass on the savings to consumers,” their letter to legislative leaders reads.

The rebate checks would be sent to every California taxpayer, regardless whether their own or drive a vehicle.

The proposal is estimated to cost the state $9 billion. The state’s budget surplus would be tapped to cover that amount.

Meanwhile, statehouse Republicans continue to call for a gas tax holiday.

Democratic Gov. Gavin Newsom has said he supports some relief from high gas prices.

Illinois

A new bill in Illinois could reduce fuel taxes by implementing a cap on sales tax collected on fuel purchases.

The state collects two taxes on fuel: a motor fuel tax and a sales tax.

The motor fuel tax is a flat tax that does not change. The 6.25% sales tax is proportional to the price of fuel.

Sponsored by Rep. Mark Batinick, R-Plainfield, the bill would cap the sales tax collected on gas and diesel at 18 cents per gallon.

“Because the state charges a percentage on the cost of gasoline for sales tax, there is a huge government windfall of money when these prices spike,” Batinick said in a news release. “The state should not experience this bump in revenue on the backs of consumers … who are already suffering financially from inflation and high gas prices.”

The bill, HB5723, would take effect 30 days after it is signed into law. The Senate version is SB4195.

Michigan

Michigan Gov. Gretchen Whitmer said she will veto a bill headed to her desk 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, would suspend the state’s 6% sales tax on gas and diesel.

Whitmer said her plan is better than the fuel tax holiday because it would keep intact road and bridge funding.

“A short-term pause is a fiscally responsible action we can take that will provide drivers relief at the pump right now,” Whitmer stated.

The governor criticized the fact the Republican-led fuel tax holiday legislation, HB5570, would not take effect until 2023.

IFTA effect

Pursuit at statehouses for fuel tax holidays that would 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 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.

Martorana pointed out that drivers who buy fuel in a state with a fuel tax exemption and drive in a state without an exemption, drivers would have to pay that tax out of pocket.

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.

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 Media reporter Ashley Blackford contributed to this report.

More fuel tax coverage

Keith Goble, state legislative editor for Land Line Media, keeps track of efforts at statehouses around the country to provide relief from higher fuel costs. Here are some recent articles by him.

Keith Goble has been covering trucking-related laws since 2000. His daily web reports, radio news and “OOIDA’s State Watch” in Land Line Magazine are the industry’s premier sources for information regarding state legislative affairs.