States take steps to revise fuel tax rates

Fuel tax rates continue to be a topic of consideration at statehouses across the country.

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

The reduction of greenhouse gas emissions is the focus of a Connecticut bill. One component of the bill is expected to result in significant fuel tax rate increases.

SB1145 would require the state Department of Energy and Environmental Protection to adopt regulations by 2025 to meet greenhouse gas reduction targets for 2030, 2040 and 2050. One change would include transportation fuels in affected emissions targeted by the state.

Critics say the bill could result in diesel prices increasing by more than 80 cents per gallon and gas prices increasing by more than 70 cents.

Indiana

Work continues at the Indiana statehouse to extend the state’s annual fuel tax increase.

In 2017, a transportation funding law took effect that included a 10-cent increase on gas and diesel purchases. The state’s diesel surcharge tax also increased by a dime.

Additionally, the tax rates were indexed on an annual basis through 2024. Annual adjustments are capped at one penny.

A Senate provision added to a lengthy House transportation bill now under consideration would extend the indexing for another year. The extension is estimated to raise an additional $30 million for the state.

A conference committee has been appointed to hash out differences in HB1050 between the two chambers. The clock is ticking with a Saturday, April 29, session adjournment.

Missouri

Time is also running short for a Missouri bill that would revisit recent fuel tax rate revisions.

In 2021, the state enacted a series of fuel tax rate changes. Specifically, the 17-cent fuel tax rate is set to increase by 12.5 cents to 29.5 cents over five years. A fuel tax rebate program is available for many 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 will take effect each July through 2025.

Missouri residents are able to go through a refund process for the additional fuel tax collection. Refunds, however, are limited to owners of vehicles weighing up to 26,000 pounds.

House lawmakers have voted 100-40 to remove the weight limitation. As a result, HB519 would allow Missouri-based truck operations to take advantage of the refund offering.

Another provision would require the state to develop a mobile app that allows a tax refund claim to be submitted at the time of purchase.

One more change would sync the refund process with the tax year and not the fiscal year as is used in the current rule.

HB519 is in the Senate Emerging Issues Committee with a May 12 session end date looming.

Ohio

One Ohio bill would provide relief from a recent increase in fuel tax rates.

A 4-year-old law included a provision to increase the 28-cent fuel tax rate to 38.5 cents for gas and from 28 cents to 47 cents for diesel.

Sponsored by Sen. Stephen Huffman, R-Tipp City, SB48 would return the gas and diesel tax to the 2019 rate.

Huffman has said money coming into Ohio from the federal infrastructure law would offset the $1.5 billion annual revenue loss.

Gov. Mike DeWine is opposed to lowering the state’s fuel tax rates. The Republican governor maintains that any plan to lower fuel tax rates would be “a mistake.”

The bill is in the Senate Transportation Committee.

Pennsylvania

A 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.

For the past decade, 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.

Senators have voted to advance to the House a bill that would put a stop to automatic increases in gas and diesel excise taxes.

SB35 would 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.

Senate Transportation Committee Chairman Wayne Langerholc, R-Cambria, has 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 previous 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.

SB35 in the House Finance Committee.

Texas

Three Texas bills would authorize additional fuel taxes.

The state now 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.

The first bill would significantly raise the excise tax. SB254 would increase the 20-cent excise rate to 40 cents for gas and diesel purchases.

Sen. Sarah Eckhardt, D-Austin, says that updating the gas and diesel tax is only a component of how the state should cover needed transportation revenue. Sources touted on her website include tolls and other user taxes “that can capture and fund increases in alternative transportation of goods, people, services and information.”

Another bill would index the excise tax to the highway cost index. HB321 would authorize the tax rate to increase or decrease each Jan. 1 based on the cost of certain highway projects.

Rep. Ray Lopez, D-San Antonio, 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.

One more bill would open the door to local fuel tax collections. HB2226 would permit municipalities to impose a penny tax on gas and diesel purchases.

The tax rate would also be linked to the consumer price index. The distinction would authorize adjustments each January.

Voters in each municipality would need to approve any local fuel tax collection.

Utah

Utah Gov. Spencer Cox acted in recent weeks to sign into law a series of tax cuts. One new law covers the state’s fuel tax rate.

Utah now charges a 36.4-cent tax on gas and diesel purchases. The rate is up 4.5 cents from a year ago.

The Utah Tax Commission adjusts the fuel tax rate each July. The commission recalculates the rate by charging 16.5% of the average motor fuel price charged by refineries to retailers at the rack.

Previously HB301, the new law changes the calculation of the fuel tax, and increases all vehicle registration fees by $7. The fuel tax provision lowers the fuel tax rate to 34.5 cents starting July 1. The change will result from dropping the rack rate from 16.5% to 14.2%.

Rates increases will be staggered through 2028 when it is expected to be as much as 42 cents per gallon.

The change is estimated to reduce state tax revenues by about $35.4 million in fiscal year 2024. Another $31 million loss is anticipated the following year.

To help cover revenue loss, the new law adds a 12.5% tax on electricity from electric vehicle charging stations. LL

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