New Year's Day State Gas Tax Increases, Decreases, and What Lies Ahead

Pennsylvania, the state that had the highest gas tax last year, saw the highest gas tax increase of 7.9 cents per gallon, the final increment of a 2013 law. Michigan's 7.3 cents tax increase, signed into law in 2015, is the second largest increase.

4 minute read

January 11, 2017, 12:00 PM PST

By Irvin Dawid

Gas Pump

Carolyn Franks / Shutterstock

Three states saw increases stemming directly from legislation; four states adjusted their tax rates upwards, and two saw decreases, also required by adjustments. See an Institute on Taxation and Economic Policy (ITEP) chart.

  • An effort to halt Pennsylvania's final gas tax increase was unsuccessful, but it was smaller than some had anticipated, and more importantly, it is the final incremental increase stemming from the 2013 legislation signed by one-term Republican Gov. Tom Corbett

Pennsylvania's gas tax on Nov. 1, 2016 was 51.40 cents per gallon per American Petroleum Institute [PDF]. The additional 7.9 cents amounts to an increase of 15 percent, bringing the total state tax to 59.3 cents per gallon, or 77.7 cents with the 18.4 cents federal gas tax.

[Correspondent's note: American Petroleum Institute (API) has yet to update its tax map to reflect 2017 rates as of press time. The PDF links in this post will provide the current tax rates when API has updated their data.]

  • Michigan's tax increase resulted from legislation signed by Republican Gov. Rick Snyder which passed not last year but in November 2015 resulting in a one-time increase of 7.3 cents. The November gas tax of 31.58 cents per gallon [PDF] will increase 23 percent to 38.88 cents per gallon.
  • The final tax increment increase due to legislation comes from one of the most significant tax increases approved in 2015, not in terms of amount (that claim goes to Washington) but in terms of political will. The unicameral Nebraska legislature overrode Republican Gov. Pete Ricketts' veto in May 2015 to approve a six-cents gas tax increase. The 1.5-cents increase on New Year's Day was the second annual increment. Two more to go.

There were four additional, though very small, increases that resulted from minor state gas tax adjustments, which research analyst Carl Davis of ITEP believes should be a component of all gas taxes.

He advocates "a more sustainable, 'variable-rate' design" rather than a flat-rate increase, "where the tax rate gradually rises alongside gas prices, the general inflation rate in the economy, vehicle fuel-efficiency, or other relevant factors..." 

  • Georgia, up 0.3 cents per gallon, "under a new formula linking the state’s fuel tax rates to growth in inflation and vehicle fuel efficiency," writes Davis. Gas tax on Nov. 1 was 31.17 cents per gallon [PDF].
  • North Carolina, also up 0.3 cents, "under a new formula linking the state’s fuel tax rates to growth in population and energy prices," adds Davis. The gas tax on Nov. 1 was 34.25 cents per gallon [PDF].
  • "Indiana’s gasoline tax rate will rise by 0.2 cents as it varies each month alongside the price of gasoline," notes Davis. It's gas tax on Nov. 1 was 31.2 cents [PDF].

Indiana House Republicans have introduced legislation to increase gas and diesel taxes by 10 cents per gallon, increase annual vehicle registrations fees by $15, and add a new, annual "road use fee" of $150 for electric vehicles, commonly known as an EV fee.

  • Finally, "Florida will implement 0.1 cent gas and diesel tax rate increases because its fuel tax rates are tied to inflation," adds Davis.

Adjusted downwards

Davis notes that New York and West Virginia reduced their gas taxes by 0.8 cent and 1 cent, respectively, "as part of an annual adjustment based on the price of gas."

Prognosis for increasing state gas taxes in 2017.

"By all indications, 2017 is shaping up to be a major year for state gas tax reform," writes Davis. "Altogether, it appears that more than a dozen states will seriously debate gas tax changes next year."

In addition to Indiana:

Hopes are higher in California to tackle it's huge road and bridge maintenance deficit now that they Democrats have obtained a majority in both the assembly and senate. Two bills have been introduced as noted in a recent post on the failure of a local transportation ballot measure in November

In addition, ITEP's State Tax Policy Director, Meg Wiehe, observes:

  • "Mississippi is in dire need of revenue to repair and maintain its crumbling roads and bridges, but there are doubts that the legislature can come to agreement on a fix despite two obvious options: raising the state's outdated gas tax, or repealing last year's misguided tax cuts.
  • "South Carolina continues to debate gas tax increases as well, with proposals that include a slowly phased in 10-cent increase and an authorization of county-level gas tax increases."

Now that New Jersey has finally succeeded in increasing its gas tax last year, the state with the second lowest gas tax is The Palmetto State at 16.75 cents per gallon [PDF].

Thursday, December 22, 2016 in Tax Justice Blog

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