
State lawmakers from Oregon to Rhode Island have introduced legislation to revise fuel tax rates.
Illinois
An Illinois House bill would freeze the state’s fuel tax rates.
Currently, a cost-of-living adjustment is made to fuel each July. The regular change is part of a 2019 state law that established annual increases in fuel taxes.
Dubbed “Rebuild Illinois,” the capital plan raised the then-19-cent gas tax and 21.5-cent diesel tax to 38 cents and 45.4 cents respectively. The legislation included various vehicle fee increases.
The additional taxes and fees were estimated to raise $2.4 billion annually. The fuel tax rates were also tied to inflation.
Starting Jan. 1, the gas rate is up to 47 cents, and the diesel rate is up to 54.5 cents.
HB1637 would temporarily halt fuel tax rate changes linked to the Consumer Price Index. The CPI adjustment would not occur from this July 1 through July 1, 2027.
Bill advocates have noted the state’s road and construction fund has increased five-fold since the tax increases took effect. They’ve argued the state is holding on to too much money and that it is time consumers receive some relief at the fuel pump.
Indiana
One Indiana Senate bill calls for ending regular changes in the state’s fuel tax rate.
Changes in fuel tax collections are tied to a state law that requires annual rate adjustments through 2027. Adjustments made each July 1 are capped at one penny.
For the past year, the state excise rates on gas and diesel have been set at 35 cents and 59 cents.
SB125 would move up the sunset date from July 2027 to July 2025.
Minnesota
In Minnesota, a House transportation bill focuses on fuel taxes and redistributing transportation revenue.
A 2023 state law indexed to inflation the gas and diesel excise tax rates. The rule allows for annual rate changes. As a result, the 28.5-cent excise rate increased the first of this year by 3.3 cents to 31.8 cents.
A House bill would halt indexing fuel taxes. As a result, the gas and diesel tax rate would stay the same.
HF5 would also change the distribution formula for transportation advancement account funds to eliminate the portion that is routed to counties in the Twin Cities metropolitan area. Funds would be redistributed to three accounts that benefit counties and cities of all sizes.
Mississippi
A tax overhaul bill halfway through the Mississippi statehouse includes a provision to increase fuel tax collection.
Mississippi has an 18-cent excise tax collected on fuel purchases. The flat tax has remained unchanged since the late 1980s.
HB1 would add a 5% sales tax to gas and diesel purchases. The fuel sales tax would add $400 million to the state budget.
The sales tax collected on fuel sales would increase the tax rate by an estimated 13 cents. Revenue would be routed to the Mississippi Department of Transportation for road and bridge work.
The bill has moved to the Senate.
Missouri
Fuel tax rate increases have been a regular occurrence in Missouri in recent years. Multiple bills would at least temporarily delay future rate increases.
A 2021 state law authorized an increase to the then-17-cent fuel tax over multiple years. Since then, the excise tax on gas and diesel purchases has been raised four times in 2.5-cent increments to 27 cents.
The final 2.5-cent increase is scheduled to take effect July 1, raising the fuel tax rate to 29.5 cents.
One Senate bill would repeal the fuel tax increases and return the rate for gas and diesel to 17 cents. SB494 also would eliminate the upcoming 2.5-cent rate increase.
Supporters have said the state should relieve some tax burden on Missourians because roads are in good shape.
A second bill could result in regular fuel tax rate changes.
HB572 would require MoDOT to include in its annual report to the governor and lieutenant governor all of the agency’s internal and external expenditures.
For each fiscal year, the department’s internal expenditures exceed 18% of its total expenditures, the government efficiency bill would mandate the state’s fuel tax rate be reduced by one penny for the following fiscal year.
The rate could be decreased by a maximum amount of 5 cents below the 29.5-cent rate slated to take effect this summer.
In any fiscal year following a rate reduction, if the department’s internal expenditures are below 18% of total expenditures, the fuel tax rate would be increased by a penny, or up to 29.5 cents, whichever is less, the following fiscal year.
House Transportation Committee Chair Josh Hurlbert, R-Smithville, said Missouri’s infrastructure is at an important crossroads. He highlighted multiple major projects that have wrapped up and a $2.8 billion project to expand Interstate 70 to six lanes across the state.
“Never have we entrusted the Department of Transportation with this level of investment,” Hurlbert said in prepared remarks. “It’s important to Missouri taxpayers that we ensure MoDOT is returning that trust by spending their funds efficiently and providing the services Missourians demand.”
New York
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.
A Senate bill would put into statute rules to help shield consumers from high fuel costs.
S2093 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.
Additionally, the bill would authorize New York City and counties throughout the state to adopt local laws limiting tax on gas and diesel.
Oregon
An Oregon Senate bill would create a new avenue to raise road revenue.
Since 2009, state law has required cities to get voter approval to raise local fuel taxes.
SB687 would allow cities and counties to raise local fuel taxes without asking voters.
Another bill provision would permit every Oregon county to implement or increase vehicle registration fees without a vote.
Currently, the fee option is available only for counties with more than 350,000 residents. Multnomah, Washington and Clackamas counties collect the fees.
Additionally, two or more counties would be permitted to establish a joint registration fee.
Counties need another $830 million annually to meet demand, according to the Association of Oregon Counties. The figure does not include state- or city-owned roads and bridges.
Bill supporters have noted that property taxes are not able to keep up with the cost of services. They’ve added that state funding for local roads is not sufficient.
Critics have said new taxes are a non-starter. Instead, they want to see the Oregon DOT be more efficient with what it already receives.
Rhode Island
A Rhode Island Senate bill would make an adjustment for inflation on the fuel excise tax. The change would result in more road revenue.
Currently, the Rhode Island Division of Taxation makes an adjustment to the fuel tax every two years on July 1. The adjustment is based only on the inflation that occurred in the previous year.
S47 would change the rule to make the adjustment every two years based on the inflation that occurred in the previous two years.
The existing 37-cent fuel tax rate is scheduled to increase by a penny to 38 cents on July 1.
Advocates have said the one-year look-back results in the fuel tax not keeping pace with inflation. They’ve pointed out that making the change proposed in SB47 would have resulted in the upcoming adjustment being 42 cents per gallon instead of 38 cents.
Texas
In Texas, the state’s 20-cent fuel tax rate has remained unchanged for over three decades. As a result, state lawmakers have been forced to look elsewhere to help bolster transportation funding.
One House bill calls for indexing the excise tax to the highway cost index. HB326 would authorize the rate to increase or decrease each Jan. 1 based on the cost of certain highway projects.
Advocates have said that indexing would allow the tax rate to keep pace with the rate of rising costs of highway construction and would add long-term stability. LL
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