Recent Legislative Actions Likely to Change Gas Taxes

8/23/2019

Fuel Tax Legislation

Photo of a gas pumpSince 2013, 31 states and the District of Columbia have enacted legislation that will increase or may increase overall state gas taxes. Missouri voters’ decision on Election Day 2018 resulted in only 30 states implementing these increases.

In 2019, thus far, Alabama, Arkansas, Illinois, Ohio and Virginia have enacted gas tax increases, although Virginia's only applies to a portion of the state. 

In 2018, Missouri and Oklahoma enacted legislation to increase their state’s motor fuel taxes. However, Missouri’s increase was subject to voter approval due to constitutional limitations on revenue increases. Proposition D failed at the ballot box in November 2018 overriding the legislature’s desire to increase the state’s motor fuels tax (see 2018 Voter Action below).

In 2017, seven states—California, Indiana, Montana, South Carolina, Oregon, Tennessee and West Virginia—have passed legislation to increase fuel taxes. Additionally, Utah enacted measures to accelerate the motor fuel tax indexing provisions implemented in the state’s 2015 fuel tax legislation, likely leading to a fuel tax increase in subsequent years.

New Jersey was the only state to enact legislation to increase state fuel taxes in 2016, following a much more active 2015 in which eight states—Georgia, Idaho, Iowa, Michigan, Nebraska, South Dakota, Utah and Washington—passed legislation to increase fuel taxes, and two more states—Kentucky and North Carolina—altered the structure of their taxes in order to limit decreasing revenues.

In 2014, lawmakers in Michigan (later overturned by voters), New Hampshire and Rhode Island enacted fuel tax legislation. While in 2013, six states—Maryland, Massachusetts, Pennsylvania, Vermont, Virginia and Wyoming—and the District of Columbia did the same.

No state legislature approved an increase to fuel taxes in 2010, 2011 or 2012. Summaries of the bills are below, with links to bill information on the relevant state legislative website. Additional details are available at NCSL’s Transportation Funding and Finance Legislation Database. Note that this list does not include those states that, because of indexing or other mechanisms, automatically altered their gas taxes during this timeframe without legislative action.

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2019 Legislative and Voter Actions

2019 Legislative Action
BILLS SUMMARY

Alabama

HB 2

Increased the state’s gas tax by 10 cents per gallon over three years. Beginning October 1, 2023, and on July 1 of every other year thereafter, the fuel tax will be indexed to the National Highway Construction Cost. Beginning on July 1, 2023 and every fourth year thereafter, the additional license tax and registration fee specified in this act shall increase by three dollars ($3)Additionally, the bill created new annual registration fees of $200 for electric motor vehicles and $100 for hybrid motor vehicles. 

Arkansas

SB 336

Imposed a new wholesale tax on fuel that would raise gas prices by 3 cents a gallon and diesel by 6 cents. The new tax will be in addition to the existing taxes on gasoline and diesel and will be calculated annually based on the average wholesale price of the fuels for the previous calendar year.

Illinois

SB 1939

Doubled the existing gas tax rate from 19 cents to 38 cents-per-gallon, beginning July 1, 2019. Beginning in 2020, it will be annually adjusted to changes in the Consumer Price Index for All Urban Consumers. Certain counties are now allowed to raise existing local gas taxes. Two additional counties, Lake and Will, are now allowed to implement their own local gas tax of up to 8 cents-per-gallon. 

Ohio 

HB 62 

Increased the state gas tax by 10.5 cents-per-gallon and the diesel tax by 19 cents-per-gallon. Ohio’s gas and diesel tax, currently at 28 cents a gallon, will go up to 38.5 cents and 47 cents, respectively.

Virginia

SB 1716

Imposed a local 2.1 percent tax on the average wholesale price of fuel in districts along the I-81 corridor which raises gas prices by about 7 cents-per-gallon in those areas. The diesel tax will increase to 2.03% of the statewide average wholesale price per gallon, which would begin in July 2021. The revenue generated from the local gas tax and diesel tax will go toward the I-81 Improvement Fund, but other revenue will be distributed to other transportation projects.  

2018 Legislative and Voter Actions

2018 Legislative and Voter Actions

BILLS

SUMMARY

California

Proposition 6

Proposition 6 was a citizen petition aiming to repeal the tax increases implemented by California Senate Bill 1 (see 2017 Legislation Action). The measure failed with approximately 55 percent of voters choosing to keep the transportation taxes.

 

Missouri
Proposition D

Missouri voters rebuked (53 percent “no” vote) the 10-cent gas tax increase sent to the ballot by the state legislature (see 2018 Legislation Action).

 

2018 Legislative Action

BILLS

SUMMARY

Missouri  

House Bill 1460

Increased the state motor fuel tax by 10 cents per gallon over four years and dedicated the new revenues to the cost of the state highway patrol. The bill also included tax rate increases for diesel and alternative fuels (natural gas, propane and others). The tax increases included in this bill are subject to voter approval per constitutional restrictions on state revenue collections. Voters did not approve the increases, see 2018 Voter Action for more information.

Oklahoma

House Bill 1010

Increased the tax on gasoline by three cents per gallon and the tax on diesel by six cents per gallon. The revenues created by this increase are dedicated to the ROADS Fund which has a statutory cap on total revenues. Thus, this increase allows for an expedited path towards that total cap, but effectively does not create an increase in transportation funding as other revenues will be moved out of the ROADS fund. See Oklahoma HB 1014 for additional information regarding the ROADS fund formulas.

 

2017 Legislative Actions

 

2017 Legislative Action

BILLS

SUMMARY

California

Senate Bill 1

Starting Nov. 1, 2017, this bill increases the state gas tax by 12 cents per gallon and the state diesel tax by 20 cents per gallon. These rates will be indexed to inflation. Additionally, the bill increases various transportation-related fees, including establishing a $100 electric vehicle fee (indexed to inflation) for vehicles model year 2020 and later. Among other provisions, $706 million of diverted transportation funds would be repaid into the transportation account.

Indiana

House Bill 1002

Establishes a one-time gas tax increase of 10 cents per gallon and indexes the tax to inflation. Additionally, the bill increases vehicle registration fees by $15 and establishes a new $150 fee for electric vehicles and a $50 fee for hybrid vehicles. The legislation also establishes a framework for implementing tolls on certain highways at the governor’s discretion.

Montana

House Bill 473

Increases the state gas tax by 6 cents per gallon incrementally through 2023 and the diesel tax by 2 cents per gallon over the same timeframe.

Oregon

House Bill 2017

Increases the state gas tax by 10 cents per gallon incrementally through 2024. Additionally establishes a new vehicle registration fee schedule based on vehicle fuel efficiency, creates new privilege tax on the sale of motor vehicles, creates a new sales tax on bicycles and establishes a payroll tax increase dedicated to transportation.

South Carolina

House Bill 3516

Beginning July 1, 2017, the motor fuel user fee will increase by 2 cents per gallon each year through 2022, for a total of 12 cents per gallon. Additionally, the bill increases the road tax on motor carriers (equal to the motor fuel user fee) and vehicle registration fees. A new biennial electric vehicle fee of $120 is established.

Tennessee

House Bill 534

Increases the state gas tax by 6 cents per gallon incrementally over the next three years and the state diesel tax by 10 cents per gallon over the same timeframe. The bill increases vehicle registration fees by $5 and establishes a new electric vehicle fee of $100. Additionally, implements various non-transportation related tax reforms.

Utah

Senate Bill 276

Accelerates indexing provisions originally implemented in Utah House Bill 362 (2015, see below). The bill lowers the artificial price floor at which the indexing provisions kick-in and increases the percentage rate tax levied on that price floor. The immediate impact on the gas tax rate is neutral. However, this acceleration is likely to cause increased fuel tax rates in future years.

West Virginia

Senate Bill 1006

West Virginia's motor fuel tax is a combination of a flat rate 20.5 cents per gallon tax and a variable rate tax on the wholesale price of fuel. This bill increased artificial price floor of the 5 percent wholesale tax from $2.34 to $3.04, effectively increasing the variable rate portion of the fuel tax by 3.5 from 11.7 cents to 15.2 cents per gallon. Additionally, the bill increased the sales tax on motor vehicles and other various motor vehicle-related fees. The increases are effective July 1, 2017.

 

2016 Legislative Actions

2016 Legislative Action
BILLS SUMMARY

New Jersey

Assembly Bill 12

Effective Nov. 1, 2016, this legislation increases the per gallon tax on gasoline from 14.5 cents to 37.5 cents, and increases, by July 1, 2017, the tax on diesel fuel by 27 cents to 43.6 cents. Going forward, the gasoline tax will be adjusted quarterly based on the price of fuel, however, a price floor and price ceiling exist to limit potential volatility as a result of fuel price and vehicle efficiency.

 

Additionally, the legislation decreases the general sales tax from 7 percent to 6.625 percent (phased in over two years), eliminates the estate tax, adjusts the retirement income tax exclusion and increases the Earned Income Tax credit. 

 

 

2015 Legislative and Voter Actions

2015 Legislative Actions

BILLS

SUMMARY

Georgia

House Bill 170

Increases the per gallon motor fuel tax from 7.5 cents to 26 cents for gasoline and 29 cents for diesel. These rates will be adjusted each year based on the consumer price index. Additionally, the bill will exempt motor fuel sales from state sales tax and permit counties and municipalities to impose a 1 percent use tax on motor fuels.

 

Further, the bill will establish new $200 registration fees for alternative fuel vehicles and index those fees to inflation. The existing $5,000 tax credit for the purchase of alternative fueled vehicles will be eliminated.

Idaho

House Bill 312

Among other provisions, this bill increases state motor fuel taxes by 7 cents per gallon, increasing the current rate of 25 cents to 32 cents. The additional revenue will be split between local governments (40 percent) and the state highway account (60 percent).

 

Additionally, the bill creates a new electric vehicle registration fee of $140 and a hybrid vehicle registration fee of $75.

Iowa

Senate Bill 257

This bill increases the state excise tax on gasoline, diesel and alternative motor fuels by 10 cents per gallon. The new excise tax on gasoline will be 30 cents per gallon. Additionally, the bill increases the excise tax on aviation fuel by 2 cents per gallon, increases fees for excess size and weight permits, and includes various other provisions.

Kentucky
House Bill 299

 

Establishes a new process for how the state determines the “average wholesale floor” price of gasoline. The new process will essentially limit the impact of a decrease in wholesale gasoline prices on the state’s nine percent excise tax on motor fuel.

Michigan HB 4738

 

This bill, on Jan. 1, 2017, increases the state motor fuel tax on gasoline by 7.3 cents per gallon and the motor fuel tax on diesel by 11.3 cents. After the increase both the tax on gasoline and diesel will be 26.3 cents per gallon. Beginning on Jan. 1, 2022, both motor fuel taxes will be indexed to inflation.

Nebraska
Legislative Bill 610

 

This bill was vetoed by the governor and subsequently overturned by the legislature. The legislation will, over the next four years, increase the portion of the tax allocated to the state by a ½ cent per year and increase the portion allocated to cities and counties by 1 cent per year. The current total gas tax of 10.3 cents per gallon will increase to 16.3 cents by 2019.

 

North Carolina

Senate Bill 20

This legislation replaces the current gas tax, which is structured to include a flat per gallon rate and a variable rate, with a flat rate of 34 cents per gallon. Beginning in 2017, this rate will be increased based on population growth and the consumer price index.

 

South Dakota

Senate Bill 1

The bill increases the tax on motor fuels by 6 cents per gallon to 28 cents. Additionally, the bill increases certain license plate fees and adjusts the excise tax on special fuels.

 

Utah

House Bill 362

Among other provisions, this bill replaces the current gas tax of 24.5 cents per gallon with a 12 percent tax on the average rack price of a gallon of gas, effective Jan. 1, 2016. For purposes of calculating the fuel, the average rack price cannot fall below $2.45 per gallon after 2019 and will be tied to the consumer price index.

 

Washington

Senate Bill 5987

Increases the state tax on motor fuel and special fuel by 7 cents per gallon on Aug. 1, 2015, and an additional 4.9 cents per gallon on July 1, 2016. The revenues from the increase will be placed in the newly created connecting Washington account and will be limited to approved transportation projects.

 

 

2015 Voter Actions

BILLS

SUMMARY

Michigan Ballot Proposal 1

 

Vote Info

Voters rejected Ballot Proposal 1, which would have, among other provisions, created a variable-rate gas tax. The proposal failed with just over 80 percent of voters opposed.

 

 

2014 Legislative and Voter Actions

2014 Legislative Actions

BILLS

SUMMARY

Michigan House Bill 5477

As part of an 11-bill transportation funding package, this bill, among other changes, replaces the current fixed motor fuel tax with a variable tax based on wholesale prices. Effective Oct. 1, 2015, the current fixed rates of 19 cents (gasoline) and 14 cents (diesel) will be replaced with a tax based on 14.9 percent of the wholesale prices of each fuel. The bill contains a mechanism to protect against large swings caused by volatile fuel prices, limiting increases to no more than 5 percent. Other bills in the transportation package exempt motor fuels from the state sales tax and adjust the state sales tax accordingly (HB 4539 and HB 5492). This package was rejected by the voters in May 2015, see 2015 Voter Actions.

New Hampshire Senate Bill 367

Among other provisions, this bill makes a one-time increase to the state tax on motor fuels, effective July 1, 2014. The increase is to be calculated according to the change in the Consumer Price Index from 2003 to 2013 (estimated at a 4.2 cent increase over the current rate of 18 cents per gallon). It also repeals the increase when the bonds authorized for a project to widen a portion of Interstate 93 are paid in full, or 20 years after the initial issuance of the bonds, whichever is earlier.

Rhode Island House Bill 7133

This budget bill does not increase the gas tax outright, but it does index it to inflation, which is expected to raise the rate in future years. Among other provisions, the legislation indexes the gasoline tax to the Consumer Price Index for all Urban Consumers (CPI-U) beginning July 1, 2015, and every other year thereafter. The calculated rate is to be rounded to the nearest $0.01 increment and the total tax must not fall below its current rate of $0.32 per gallon.

 

2014 Voter Actions

BILLS

SUMMARY

Massachusetts Ballot Question 1

 

Vote Info

Voters approved Ballot Question 1, which repealed the indexing requirements of House Bill 3535 (2013). The initiative petition passed with just under 53 percent of the vote.

 

2013 Legislative Actions

2013 Legislative Actions

BILLS

SUMMARY

Maryland House Bill 1515

 

Among other provisions, this bill indexes motor fuel tax rates to the Consumer Price Index starting in FY 2014 and limits the increase to no more than 8 percent of the rate effective in the previous year. It also phases in a new sales and use tax equivalent rate on motor fuel (based on a percentage of the retail price), with the final rate contingent on whether federal legislation on out-of-state sales tax collection is enacted by Dec. 1, 2015. In addition, the legislation requires the Maryland Transit Administration (MTA) to index transit fares to inflation starting in FY 2015.

Massachusetts House Bill 3535

Among other provisions, this bill increases the gas tax from 21 cents per gallon to 24 cents per gallon from July 1, 2013, to Jan. 1, 2015. Starting in 2015, the rate will be indexed to inflation.

Pennsylvania House Bill 1060

Among other provisions, this comprehensive transportation funding package repeals the state’s cents-per-gallon fuel tax as of Jan. 1, 2014, and replaces it with an increased rate on the oil company franchise tax. This increased rate is achieved by raising and removing the cap on the average wholesale price of fuels subject to the tax. Beginning Jan. 1, 2017, the cap is eliminated and a $2.99 floor is put in place. The bill also raises various fees to the rate of inflation and indexes them to inflation thereafter; increases funding for multimodal and public transportation; and creates an optional county vehicle registration fee.

Vermont House Bill 510

This bill imposes a 4 percent tax on the average retail price of gasoline over two years (within limits) while also lowering the cents-per-gallon gas tax by a total of 6.9 cents per gallon. It is predicted to yield a net gas tax increase of 5.9 cents per gallon in FY 2014. The bill also raises the diesel tax by 3 cents per gallon over two years.

Virginia House Bill 2313

This legislation repeals Virginia’s cents-per-gallon gas tax entirely. In place of the previous 17.5 cents-per-gallon tax, the bill 1) establishes a percentage-of-wholesale-price tax of 3.5 percent for gasoline and 6 percent for diesel, with additional rate increases contingent on whether federal legislation on out-of-state sales tax collection is enacted by Jan. 1, 2015, 2) increases the dedicated share of existing general sales tax revenues used for transportation from 0.5 percent to 0.675 percent, and 3) also raises the sales tax itself by 0.3 percent across the state, with the additional revenues also to be allocated to transportation purposes. The bill further creates a $64 annual fee on hybrid, alternative fuel and electric vehicles. (The fee for hybrid vehicles was repealed in 2014.)

Wyoming House Bill 69

This bill raises the total tax on gasoline and diesel from 14 cents per gallon to 24 cents per gallon, effective July 1, 2013.

District of Columbia Bill 20-199 §7291

A provision within the budget bill replaces the previous cents-per-gallon gas tax with a tax that is 8 percent of the average wholesale price. For the purposes of this calculation, the average wholesale price cannot be less than $2.94 and it cannot vary by more than 10 percent of the average wholesale price for the previous six-month period.


 

 

Variable Rate Structures

A key consideration for policymakers is the implications of a fixed cent-per-gallon fuel tax compared to a variable rate or indexed tax structure.

Of these 31 states and the District of Columbia, 16 states—Alabama, Arkansas, CaliforniaGeorgia, IndianaKentucky, Michigan, Massachusetts, Maryland, North Carolina, Pennsylvania, Rhode Island, Utah, VermontVirginia and West Virginia—and D.C. chose to keep or implement indexing provisions within their fuel tax structure, presumably to ensure revenues kept pace with inflation and fuel consumption patterns.

To learn more about variable rate and indexed fuel taxes, visit NCSL’s Variable Rate Gas Taxes webpage.

Ballot Measures

Ballot Measures vote.Additionally, in recent years, three states took the question of gas tax increases to their voters.

In November 2018Missouri voters did not approve the 10 cents per gallon increase in the state motor fuels tax authorized by H.B. 1460 (2018).

In 2013, the Massachusetts legislature passed House Bill 3535, which increased the state gas tax and, among other provisions, set the gas tax to be indexed to inflation starting in 2015. In the November 2014 midterm elections, Massachusetts voters approved a ballot initiative that repealed the indexing requirements of HB 3535.

In May 2015, Michigan voters rejected Ballot Proposal 1, which would have enacted an 11-bill transportation funding package, including the state gas tax increase. The Michigan Legislature subsequently passed a separate transportation funding package which did not require voter approval.

Transportation Funding Deep Dive

In addition to the legislation and information below, NCLS maintains the Transportation Funding Deep Dive webpage. NCSL Deep Dives are one-stop shops for the newest policy trends and ideas. Dive in often for the latest on what states are doing.

State Gas Tax Map

The map below indicates the 31 states and the District of Colombia that have enacted legislation to increase their state motor fuel taxes since 2013. Missouri is unique in that voter approval is still required to fully authorize the increase.

US map showing state gas taxes.