Three states approve fuel tax holidays; other states pursue action
Nearly two weeks have passed since Connecticut became the third state to approve a fuel tax holiday for at least certain drivers. Georgia and Maryland also have taken action.
Efforts continue around the country to provide similar relief from high fuel costs for motorists and truck drivers. Some actions underway at statehouses are included below.
Virginia
Virginia Gov. Glenn Youngkin has sent legislation to the General Assembly to suspend state fuel tax collection for three months.
Virginia collects a 26.2-cent-per-gallon tax on gas and a 27-cent tax for diesel.
The governor is calling for the tax holiday to run from May through July and to phase the tax back in slowly in August and September.
Youngkin, a Republican, said the state could absorb the lost revenue by tapping into excess transportation funds. The amount needed is estimated to be about $437 million.
“With gas prices and inflation squeezing families’ pocketbooks across Virginia and the nation and with over $1 billion in unanticipated revenue in our transportation fund, the General Assembly must act now,” Youngkin said in a news release. “Virginia should join numerous other states, led by both Republicans and Democrats, in temporarily suspending the gas tax. Actions speak louder than words, we can lower gas prices now for all Virginians.”
His plan would also cap the annual adjustment to the fuel taxes at no more than 2% per year “to further protect Virginians from the hidden tax increase of inflation.”
The bills, HB6001 and SB6001, can be considered during the special session.
Florida
In Florida, state lawmakers have reached agreement on a gas tax holiday initially pursued by Gov. Ron DeSantis.
The GOP-led legislature approved a state budget that includes a one-month gas tax holiday. The tax holiday from collecting the 27-cent tax rate would 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.
DeSantis, a Republican, sought a six-month gas tax holiday to provide more than $1 billion in tax relief.
California
A group of Assembly Democrats 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 they 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, an effort by statehouse Republicans for a six-month gas tax holiday was shot down by legislative leaders.
Instead, the provision was gutted from legislation and replaced with language to increase taxes on fuel suppliers when the price of fuel is abnormally higher than the price of a barrel of crude oil. The tax revenue would be passed down to consumers as a rebate.
Democratic Gov. Gavin Newsom has said he supports some relief from high fuel prices.
Newsom 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 wants to send debit cards to drivers of gas-powered vehicles and electric-powered vehicles.
His proposal has a more than $10 billion price tag.
In addition to $9 billion in tax refunds, up to $600 million would be necessary to pause a part of the sales tax rate on diesel for one year. Another $523 million would be used to pause the inflationary adjustment to gas and diesel excise tax rates.
Not so fast
Despite the trend nationally to pursue fuel tax relief for at least some consumers, the idea is not taking hold in some states.
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.
In Arkansas, Gov. Asa Hutchinson said he opposes a gas tax holiday. Instead, the GOP governor said relief from higher gas prices and inflation could warrant tapping into the state’s surplus.
Republican leaders at the Iowa statehouse cite potential financing delays in getting road work done for not taking action.
Instead, House Speaker Pat Grassley, R-New Hartford, said the federal government should take the lead on addressing fuel prices.
Michigan Gov. Gretchen Whitmer followed through on her veto threat of a bill to 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, her plan is to 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 would not take effect until 2023.
The bill lacked the required two-thirds majority needed to take effect immediately. As a result, the tax break would not have started until January.
In Massachusetts, the state Senate shot down a proposal to suspend fuel tax collections through Labor Day.
West Virginia Democratic legislators say they want a 30-day gas tax holiday.
Majority GOP lawmakers are not pursuing any relief from fuel costs. Instead, relief efforts are focused on a possible $100 tax rebate.
Republican Gov. Jim Justice says he supports suspending the state’s 35.7-cent fuel rate, but it is up to the legislature to take action.
Enacted fuel tax holidays
Maryland was the first state 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 March 18, Maryland Gov. Larry Hogan signed into law legislation to suspend collection of the state’s fuel rates for 30 days. The tax holiday took effect immediately and runs through April 16.
Suspending the 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.
The Republican governor has since said it may be necessary to extend the tax holiday beyond the original 30-day time period.
Georgia Gov. Brian Kemp also signed 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 last month 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.
In Connecticut, Gov. Ned Lamont signed a bill into law March 22 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 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.”
IFTA effect
Pursuit at statehouses for fuel tax holidays that would include diesel has the attention of professional drivers. Truckers 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.
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. LL
Land Line Media reporter Ashley Blackford contributed to this report.
More state trends
Keith Goble, state legislative editor for Land Line Media, keeps track of many trends among statehouses across the U.S. Here are some recent articles by him.
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