From pennies to major jumps, fuel tax changes are rolling out nationwide as states kick off the new year.
Over the past year, more than a dozen states have adjusted their tax systems. Some raised rates, while others cut.
Washington increased its gas tax by 6 cents. Connecticut decreased its diesel tax by 3.5 cents.
Jan. 1 changes
As of the first of the year, small increases of about one cent or less will take effect in Florida, Georgia, Minnesota, and North Carolina. Small decreases of less than one cent will take effect in New York, Utah, and Vermont.
These changes come from automatic adjustments. They can either be tied to inflation or set by law without legislative action.
Nebraska, Pennsylvania and West Virginia also allow automatic adjustments, but their fuel tax rates will stay the same to start 2026.
States with larger fuel tax rate changes taking effect Jan. 1 are listed below.
Michigan
Michigan will see the largest fuel tax increase.
Gov. Gretchen Whitmer signed a nearly $2 billion transportation funding package into law. A key part of the plan changes how fuel is taxed.
Truck drivers and motorists pay a 31-cent state excise tax on fuel. They also pay a 6% state sales tax on every gallon of gas or diesel.
Much of the sales tax revenue does not go to transportation.
Under the new law, the sales tax on fuel will be eliminated. It will be replaced with a higher fuel excise tax.
This change ensures all fuel tax revenue goes to transportation projects. Michigan’s constitution requires that fuel tax revenue be used for transportation.
As a result, the fuel excise tax will rise from 31 cents to 52.4 cents per gallon on Jan. 1.
New Jersey
A 2024 New Jersey law allows the state to raise fuel taxes each year through 2029. The rule is intended to help the state meet transportation funding needs.
New Jersey’s fuel taxes consist of two parts: a petroleum products gross receipts tax and an excise tax.
The petroleum tax on gas will rise by 4.2 cents, from 34.4 cents to 38.6 cents per gallon. The petroleum tax on diesel will also increase by 4.2 cents, from 38.4 cents to 42.6 cents per gallon.
When combined with the fixed 10.5-cent motor fuels tax, the total state gas tax will be 49.1 cents per gallon. With the fixed 13.5-cent motor fuels tax, the total state diesel tax will be 56.1 cents per gallon.
Oregon
A gas tax increase set to take effect Jan. 1 in Oregon has been put on hold.
Lawmakers approved a 6-cent increase, raising the gas tax from 40 cents to 46 cents per gallon. The approval came during a recent special session.
After it was signed into law by Gov. Tina Kotek, a statewide petition drive began to delay the increase until voters could decide.
Organizers gathered nearly 200,000 signatures. That forces the state to pause the tax hike until the November 2026 election.
The increase is part of a broader transportation funding package. Planned hikes to passenger vehicle registration and title fees are also delayed.
Other parts of the bill will still take effect. One change will apply the motor vehicle fuel tax to diesel.
Automatic adjustments
Automatic fuel adjustments work in different ways. One method sets the tax as a percentage of the wholesale fuel price.
Another method combines a price-based tax with a flat excise tax. Some states tie fuel taxes to inflation, using measures such as the Consumer Price Index or the National Highway Construction Cost Index.
States also update these taxes on different schedules. Some adjust rates once a year, while others do so more often.
The National Conference of State Legislatures says 25 states use variable fuel tax rates.
Rate changes may happen monthly, quarterly, every six months, annually, or every two years.
Indiana updates its fuel sales tax each month. Vermont adjusts its rates quarterly. Nebraska does so every six months.
Alabama and Rhode Island update rates every two years. Mississippi will begin making changes every other year starting in 2029.
Annual updates occur in Arkansas, California, Colorado, Connecticut, Florida, Georgia, Illinois, Indiana, Kentucky, Maryland, Michigan, Minnesota, New Jersey, New York, North Carolina, Pennsylvania, Utah, Virginia, Washington, and West Virginia. LL
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