Nine states pursue action on fuel tax rate changes

A trend at statehouses from coast to coast is the pursuit of changing how much fuel tax is collected from motorists and truckers.

Advocates for trimming fuel tax collection at the state level say the time is right for the move. They cite new federal dollars for transportation purposes, higher fuel costs, and budget surpluses that could cover reductions in fuel tax collections.

Connecticut

Weeks after the state of Connecticut imposed a highway user tax on trucks, one state lawmaker wants to give truckers some relief via the diesel tax.

On July 1, the state implemented a regularly scheduled adjustment to the diesel tax. As a result, the then-40.1-cent excise rate increased by 9 cents to 49.2 cents per gallon.

Diesel in the state is taxed following an annual formula that includes a fixed base and an adjustment that accounts for the average wholesale diesel prices from the prior year.

Sen. Jeff Gordon, R-Woodstock, is behind an effort to return the diesel tax rate to 40.1 cents.

Additionally, SB126 calls for establishing a task force to recommend changes to the statutory formula that sets the applicable tax rate for diesel.

The bill is in the Joint Committee on Finance, Revenue and Bonding.

Maryland

A Maryland bill would end automatic fuel tax rate adjustments.

Since 2013, the state automatically adjusts the tax rates for gas and diesel each July. The current rate for gas is 36.1 cents, and the diesel rate is 36.85 cents.

During the past decade, the rates have increased 12.6 cents from 23.5 cents for gas and 24.25 cents for diesel.

Sponsored by Sen. Jason Gallion, R-Harford, SB261 would end automatic adjustments based on growth in the consumer price index for all urban consumers.

The Senate Budget and Taxation Committee is scheduled to discuss the bill on Feb. 8.

Missouri

Multiple Missouri bills would provide some tax relief for many highway users.

In 2021, the governor signed into law a bill to increase the 17-cent fuel tax rate by 12.5 cents to 29.5 cents over five years. The law includes a fuel tax rebate program for residents.

The first installment of annual 2.5-cent increases took effect in October 2021. The second installment went into effect on July 1.

The tax rate now is set at 22 cents for gas and diesel purchases.

Additional 2.5-cent increases are scheduled to take effect each July through 2025.

Missouri residents are permitted to be refunded for the additional fuel tax collection. Refunds are limited to owners of vehicles weighing up to 26,000 pounds.

Sen. Mike Moon, R-Ash Grove, is behind a bill to remove the weight limitation. As a result, SB259 would allow Missouri-based truck operations to take advantage of the refund offering.

Another bill introduced by Moon, SB260, would repeal the tax increases and return the rate for gas and diesel to 17 cents.

Moon says the state should relieve some tax burden on Missourians because roads are in good shape.

A separate bill would also repeal the 2021 tax increase and future increases included in the law.

In addition, SB242 calls for a 180-day fuel tax holiday during which no tax would be collected on gas or diesel purchases.

Similarly, another Senate bill would repeal the 2021 law. SB454 does not include a fuel tax holiday.

Nevada

Newly elected Nevada Gov. Joe Lombardo wants to give highway users a temporary break from fuel expenses.

During his first State of the State Address, the Republican governor proposed suspending the state’s gas and diesel excise rates for one year.

The state diesel excise rate is 27 cents. The gas rate is 23 cents.

Speaking to the Democrat-led legislature, Lombardo said state government has “more money than we can responsibly spend,” and one thing they can do with the money is aid consumers at the pump.

He said the 12-month tax break would save consumers $250 million.

“Working with local gas station operators, the petroleum industry, and the attorney general’s Consumer Affairs Division, we will make certain that these savings exclusively benefit taxpayers,” he said. “Using our budget surplus to provide tax relief won’t negatively affect our fuel-tax funded road and construction program or impair bonds.”

The legislature must agree to the tax holiday.

New Hampshire

A New Hampshire House bill covers costs related to the state’s fuel tax.

Rep. Andrew Prout, R-Hudson, has introduced a bill to trim about four cents from the state’s “road toll.”

In 2014, the state adopted a rule to increase the then-18-cent excise rate by 4.2 cents to 22.2 cents.

HB62 would revert to the rate in place from 1991-2014. The change would take effect on July 1.

A fiscal note attached to the bill states the general fund would be tapped to offset revenue losses from the fuel tax reduction. The amount is estimated at $34 million annually.

New York

About a month removed from the sunset of a seven-month tax holiday on gas and diesel purchases in the state, multiple measures would continue price breaks.

The Empire State charges about 33 cents per gallon for gas and diesel. There are multiple components that make up the state’s fuel tax collection.

There is an 8-cent excise tax and a 17.3-cent petroleum business tax. Additionally, there is an 8-cent state sales tax.

Gov. Kathy Hochul acted last spring to suspend collection of the excise tax and state sales tax through the end of the year. The action trimmed fuel rates by 16 cents per gallon.

Sen. Jim Tedisco, R-Glenville, has introduced a bill to put into statute rules to help shield consumers from high fuel costs.

SB2174 would suspend collection of the excise tax and state sales tax when fuel prices reach $2.25 per gallon. The petroleum business tax would also be eliminated once prices reach $3 per gallon.

New York City and counties throughout the state also would be authorized to adopt local laws limiting tax on gas and diesel.

A related effort, AB1690/SB3124, would suspend collection of the state sales tax on gas and diesel purchases for two years. Localities also would be permitted to suspend their portion of sales tax.

Bill sponsors say the sales tax is considered one of the most regressive taxes imposed on New York state residents.

“The windfall of additional state sales tax revenue from inflated prices of goods should not be compounded on the backs of New York consumers,” sponsors wrote in a bill memo.

Pennsylvania

One bill halfway through the Pennsylvania statehouse is touted to reform the state’s fuel tax collection.

On Jan. 1, Pennsylvania’s 57.6 gas tax rate increased 3.5 cents to 61.1 cents per gallon. The 74.1-cent diesel rate rose 4.4 cents to 78.5 cents.

The changes are due to the state’s variable-rate fuel taxes.

Since 2013, the state taxes increase automatically when the average fuel price exceeds $2.99 per gallon. The Pennsylvania Department of Revenue determined that over the past year, the average price statewide exceeded that amount triggering the latest increase.

The Senate voted 29-19 last month to advance a bill to stop automatic increases in gas and diesel excise taxes.

Senate Transportation Committee Chairman Wayne Langerholc, R-Cambria, is behind the bill to roll back the excise tax rates to the amounts collected on Dec. 31. Additionally, the average wholesale price would be set permanently at $2.99 per gallon.

Langerholc said the changes would end automatic tax hikes.

“My legislation will cut the gas tax before hardworking families must pay the second highest gas tax in the nation,” Langerholc said in a news release. “At a time when our constituents are faced with rising costs at the pump, grocery store and utility bills, no elected official should be voting against this legislation.”

Instead, advocates say lawmakers should be responsible for making decisions on possible fuel rate increases.

The bill, SB35, awaits assignment to committee in the House.

Texas

Efforts underway in the Texas Legislature would authorize fuel tax rate increases.

The state of Texas collects a 20-cent-per-gallon excise tax on gas and diesel purchases. According to the Texas Comptroller, the rate is unchanged since October 1991.

One bill from Sen. Sarah Eckhardt, D-Austin, would significantly raise the excise tax.

SB254 would raise the 20-cent excise rate to 40 cents for gas and diesel purchases.

The change would take effect on Sept. 1.

Eckhardt says that updating the gas and diesel tax is only part component of how the state should cover needed transportation revenue. Other sources she touts on her website are tolls and other user taxes “that can capture and fund increases in alternative transportation of goods, people, services and information.”

Rep. Ray Lopez, D-San Antonio, has introduced a bill to index the excise tax to the highway cost index.

Specifically, HB321 would authorize the tax rate to increase or decrease each Jan. 1 based on the cost of certain highway projects.

Lopez has said that indexing would allow the tax rate to keep pace with the rate of rising costs of highway construction and add long-term stability.

West Virginia

A West Virginia House bill would eliminate one component in establishing the state fuel tax rate.

Fuel tax rates in the state are comprised of two components. The excise rate is 20.5 cents for gas and diesel. The variable rate on both fuels is 16.7 cents.

The variable rate, which is equal to 5% of the average wholesale price of motor fuel, is revised each January. The most recent increase was 1.5 cents.

Sponsored by Delegate Joe Ellington, R-Mercer, HB2826 would remove the variable rate on state fuel tax collections.

The bill is in the House Finance Committee. LL

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