When state legislatures gaveled into session this past January, eight states had already implemented statewide gasoline and diesel excise tax increases for 2017. It now appears many more states are on their way to passing increases of their own.
As of April 26th, five states (California, Indiana, Montana, Tennessee, and Utah) have passed some form of a fuels tax increase, and 12 other states are considering similar statewide changes to their fuels taxes. Of those states, one—Connecticut—is looking to lower its gas tax in exchange for bringing back tolls along its highways.
A summary of the bills that have passed and those currently pending that would have a statewide effect on fuels taxes follows.
Five States Have Passed A Statewide Fuels Tax Increase Since January
The following five states have passed laws increasing their gasoline and diesel taxes statewide:
California: On April 6th, lawmakers narrowly passed SB1 to increase the gasoline tax by approximately $0.12/gallon over three years ($0.06/gallon on July 1, 2017; plus $0.03 more on July 1, 2018; and $0.03 more on July 1, 2019). The current gasoline tax is $0.278/gallon. The diesel tax will also more than double, increasing by $0.20 to $0.26/gallon from its current $0.16/gallon. The state has not increased its gasoline tax since 1994. The increases will go into effect on November 1, 2017. Governor Jerry Brown is expected to sign the bill into law.
Indiana: Last year, a $0.04/gallon increase was approved by the House, but faced fierce opposition in the Senate and from former Governor Mike Pence. Due to fluctuations in the price of gasoline, Indiana consumers are paying $0.002/gallon more this year. HB1002, introduced in January and passed right before the legislature adjourned in April, increases the $0.18/gallon gasoline tax and the $0.16/gallon diesel tax by $0.10. The $0.11 surcharge tax on diesel will also nearly double to $0.21, and will be collected at the pump instead of in quarterly tax filings. The taxes will be indexed on an annual basis through 2024. Annual adjustments will be capped at $0.01. Governor Eric Holcomb is expected to sign the bill.
Montana: After a series of compromises to scale-down a fuels tax package, the Montana legislature recently passed HB473, increasing the gasoline tax by $0.045/gallon and the diesel tax by $0.015/gallon this year. By mid-2022, the increases will reach $0.065/gallon and $0.02/gallon, respectively. An earlier version of the bill would have hiked the gas tax by $0.08/gallon and the diesel tax by $0.0725/gallon. This is the first increase since 1993. The bill now heads to Governor Steve Bullock’s desk for signing.
Tennessee: The state legislature recently passed a measure that will raise the gas tax by $0.06/gallon and the diesel tax by $0.10/gallon over the next three years. Part of Governor Bill Haslam’s IMPROVE Act, the increase will be the first since 1989 and will be gradually phased-in so as to hopefully go unnoticed by consumers ($0.04/gallon initially, and then increases of $0.01/gallon for gas and $0.03/gallon for diesel each following year). The bill differs slightly from Governor Haslam’s initial proposal, which would have increased the roughly $0.20/gallon gasoline rate by $0.07 and the $0.17/gallon diesel rate by $0.12. The bill now heads to his desk for signing.
Utah: SB276, signed by Governor Gary Herbert on March 21, 2017, imposes automatic increases in the state’s $0.294/gallon fuel tax with a ceiling that would cap tax rates at about $0.40/gallon. The taxes are expected to increase about $0.006/gallon in 2019 and $0.012/gallon in 2020, as the formula for fuel taxes approved in 2015 is reworked. The law also triggers a 16% tax on fuel once the wholesale price reaches $1.78/gallon.
Twelve States Are Still Considering Statewide Fuels Tax Legislation
As state legislatures slowly begin to wind down their 2017 sessions, the following twelve states are still considering statewide increases (or in Connecticut’s case, a decrease) to their gasoline and diesel taxes:
Alaska: HB60 / SB25, introduced in January, would triple the gasoline and diesel tax by 2018. The tax would increase from $0.08/gallon to $0.16/gallon on July 1, 2017. On July 1, 2018, the tax would rise to $0.24/gallon. Both bills have advanced through their respective committees, and there appears to be no significant opposition to the tax increase. Alaska currently has the lowest gas taxes in the country, and the proposed increase would still leave it below average nationally, according to a report published by the Institute on Taxation and Economic Policy.
Arizona: Arizona has not raised its $0.18/gallon gasoline tax since 1991, but that may be about to change. HCR2011 would increase the state’s gasoline and diesel tax by $0.10/gallon to $0.28/gallon. While the bill would need a two-thirds vote in both the House and the Senate, the question could be placed on the state’s 2018 ballot by a simple majority vote.
Connecticut: HB6058, introduced in January, would lower the state’s current $0.25/gallon gas tax by $0.025 over five years, in exchange for bringing back tolls along Connecticut’s highways. The bill narrowly made it out of committee and now heads to the full House for a vote.
Kansas: Introduced in March, SB 224 / HB2412 would increase both the $0.24/gallon gasoline and $0.26/gallon diesel tax rates by $0.05/gallon, while HB 2237 / HB 2382 would increase them by $0.11/gallon. All bills are still in their respective committees. It is unclear whether any bill will see movement before the legislature adjourns in mid-May.
Louisiana: The current gas tax sits at $0.20/gallon and has been in place for nearly three decades. HB553and HB758 would increase the gasoline and diesel fuel tax by $0.07/gallon, while HB600 would increase the motors fuels tax by $0.10/gallon. Moreover, HB632 would increase the gas tax by $0.17/gallon, and would become effective July 1, 2017. On the other hand, HB659 would initially increase the fuels tax by $0.09/gallon, and provide the rate to be increased to $0.17/gallon in 2022 if certain requirements are satisfied.
Maine: LD1149 (also referred to as HB812), introduced in late March, would increase the gasoline and diesel tax by $0.07, from $0.295/gallon to $0.365/gallon, beginning October 1 2017. The bill is currently in committee.
Minnesota: HF1899 / SF1799, introduced in the beginning of March, would raise the $0.285/gallon gasoline tax rate and $0.385/gallon diesel tax rate by $0.10. The change would take effect October 1, 2017. Both bills are currently in committee.
Missouri: The current fuel tax rate is $0.17/gallon, and has remained unchanged since 1996. While there are a number of pending bills in Missouri that would affect the gas and diesel rate, it is uncertain whether any gas tax increase would pass. Most recently, the House rejected a proposal to let voters decide whether to raise the gasoline tax by approximately $0.06/gallon in 2018. The proposal was introduced as an amendment to HB 694.
Other pending bills in Missouri that would affect the gas and diesel tax rate include: (1) Senate Joint Resolution 3, introduced in January, which would raise the state’s gas tax rate by $0.015 and the diesel tax rate by $0.035, and would require voter approval; (2) HB992 which would increase the fuel tax rate to $0.34/gallon, and would take effect on January 1, 2024; and (3) HB993 which would, beginning January 1, 2018, increase the tax on motor fuel up to $0.03/gallon per year until the total increased motor fuel tax revenue equals the total income tax revenue reduction from the decrease in the top tax rate of the individual income tax.
Oregon: HB2121, introduced in January, would increase the state’s $0.30/gallon fuel tax by $0.05/gallon starting in January 2023 and raised by a nickel every five years. During her inaugural address, Governor Kate Brown urged lawmakers to pass a major transportation funding package.
South Carolina: South Carolina senators are currently locked in debate over a $0.12/gallon increase to the gas tax ($0.02/gallon per year for six years). HB3516, introduced in January and passed in the House in March by a veto-proof margin, initially would have increased the $0.1675/gallon tax by $0.10 over a five year period ($0.02 per year), but an amendment was passed while in a Senate committee that raised the tax to $0.12/gallon. Regardless, Governor Henry McMaster has pledged to veto any gas tax increase, making the bill’s passage uncertain.
Texas: HB2513, introduced at the end of February, would increase the diesel rate by $0.02/gallon to $0.22/gallon. The change would take effect on September 1, 2017. HB3961 would increase both the diesel and gasoline rates by $0.02/gallon.
West Virginia: West Virginia lowered its fuel tax by a penny in January. SB477, introduced in March, would increase the $0.205/gallon gasoline tax rate by $0.045 to $0.25/gallon. Governor Jim Justice initially asked for a $0.10 hike. The Senate passed its version of the bill on March 25, 2017, and the bill now moves to the House for consideration. After vetoing a budget bill presented to him in mid-April, Governor Justice said he is prepared to call a special session to continue debate on the budget, which may include discussions on the above-mentioned gas tax.
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