Seven states impose fuel tax changes July 1, others freeze rates

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 kick in the first of July.

Automatic tax rate changes range from a 9-cent diesel tax increase in Connecticut to cost increases of about two cents in many states. Elsewhere, states have taken action to prevent scheduled increases.

California

Another round of fuel rate increases in California take effect the first of the month. The increases are 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 Friday, July 1, the gas rate is up 2.8 cents per gallon to 53.9 cents.

The diesel tax in the Golden State 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 fuels 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 10-year, $52 billion transportation funding deal – SB1 – is touted to benefit local roads, trade corridors and public transit.

Colorado

In May, Colorado Gov. Jared Polis 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 includes a new 2-cents-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 headed 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 this year signed a number of tax policy changes that include a freeze to 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 will be 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 were also 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 acted early this month 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 will each increase by 6.6 cents.

The action follows Gov. Larry Hogan signing into law legislation in March to suspend collection of the state’s fuel rates for 30 days through April 16.

The changes set for the first of the month are due to an eight-year-old inflation indexing law. Maryland law authorizes fuel rates to be adjusted each July based on the consumer price index.

As a result, the gas tax will increase from 36.1 cents to 42.7 cents. The diesel rate will be raised 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 the month marks 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 takes effect on July 1. At that time, the gas and diesel rate will be set at 22 cents.

South Carolina

The 26-cent diesel and gas excise rate collected in South Carolina is going 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 first of the month. The 26.2-cent tax rate will increase by 1.8 cents to 28 cents.

The 27-cent diesel rate will be raised to 28.9 cents.

The tax rate changes are due to indexing to annual changes in the consumer price index. LL

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