Fuel Tax Rate Changes

From ATA’s State Law Newsletter

Most state legislatures met this year, and nearly every one of them has gone home by now. While they were in session, more than a few seriously discussed raising fuel taxes, but no such legislation has actually passed so far in this election year. However, that doesn’t mean there haven’t been any fuel tax rate changes since the end of last year. By our count, tax rates have changed in fifteen of the states so far in 2016. Some of the changes were the consequence of legislation enacted during 2015, but most represent continuing periodic rate changes in the states that have either enacted variable fuel tax rates over the years or that impose their sales taxes on highway fuel. Both these mechanisms tie the rate of the fuel tax, at least partially, to the price of fuel, and in these states, the fuel tax rates have generally gone down in 2016. First, then, the states where the rates have risen: Florida, Maryland, Utah, and Washington State. In the last two, the rates went up by 4.9 cents on both diesel and gasoline under legislation that passed last year. In Maryland, which has a variable rate determined partly by price and partly by the cost of living, the rate on both fuels went up 0.5 cents. In Florida, which has a complicated variable fuel calculation tied partly to price, the rate on diesel went up a tenth of a cent, and gasoline stayed where it was last year.

And eleven states’ rates have gone down since December 31, 2015. All but one of those are tied to the price of fuel, which has of course generally fallen recently. The one is Iowa, where the rates on gasoline and diesel are dependent in part on how much ethanol and biodiesel, respectively, are sold during the year. There, the rate on gasoline fell a tenth of a cent, and diesel remained constant. The other states with reduced rates are: California, Connecticut, Illinois, Michigan, Nebraska, New York, North Carolina, Pennsylvania, Vermont (gasoline only), and West Virginia. In a few of these, the reduction was less than 1 cent per gallon: Michigan (for diesel - the gasoline rate fell more), Nebraska, and Pennsylvania. In all the others, however, the decrease in the rates on both gasoline and diesel was at least a penny, and sometimes much more. In Connecticut, for instance, the rate on diesel has dropped 8.6 cents a gallon, and in Illinois the gasoline rate fell 6.5 cents and the rate on diesel 7.1 cents. In North Carolina, where the rate on both fuel fell only a penny, it would have fallen farther if legislation last year had not set a floor for rates. (Kentucky enacted similar legislation last year freezing its rate, or it too would have fallen in 2016.) In many states, presumably, variable fuel taxes were passed as a way for legislators to keep from having to vote continual increases in per-gallon rates.