Six States Have Raised or Reformed Their Gas Taxes This Year

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As we’ve noted previously, eight states enacted gas tax increases or reforms in 2013 and 2014 to better fund their transportation infrastructure.  So far this year, six more states have joined this list, meaning that a total of 14 states have taken action on the gas tax in just over two years’ time (Wyoming kicked off this trend in February 2013).  Here’s a quick rundown of what has been enacted this year: 

1. After years of debate, Iowa’s gasoline and diesel taxes finally rose by 10 cents per gallon on March 1 as a result of legislation enacted in February.  The increase was Iowa’s first in more than a quarter century.

2. Next door in South Dakota, lawmakers quickly followed Iowa’s lead with a law that raised gasoline and diesel taxes by 6 cents starting April 1.

3. Utah took a more long-term approach to its gas tax with a law that will hugely improve the tax’s sustainability.  In addition to raising the rate by 5 cents on January 1, 2016, the state also converted its fixed-rate gas tax into a smarter variable-rate gas tax that will initially grow alongside gas prices, and then eventually alongside the greater of gas prices or inflation.  Utah is now the 19th state to adopt a variable-rate gas tax.

4. Georgia Gov. Deal has promised to sign a transportation funding bill recently approved by the state legislature.  Under the bill, the state portion of the gas tax will rise by 6.7 cents on July 1.  Until 2018, the rate will rise each subsequent July based on growth in both vehicle fuel-efficiency and inflation, after which point the inflation factor will be dropped and the rate will be determined based on fuel-efficiency changes alone.  Georgia is the first state in the nation to tie its gas tax rate to fuel-efficiency gains: a recommendation we have made in the past.

5. Kentucky drivers received a 1.6 cent gas tax cut on April 1, far less than the 5.1 cent cut that would have taken effect if lawmakers had not acted.  This was accomplished by raising the state’s minimum gas tax level from 22.5 to 26.0 cents per gallon.  In addition to this boost in the state’s gas tax “floor,” lawmakers also reformed (PDF) the tax with an eye toward predictability by mandating that gas tax cuts brought on by falling gas prices cannot exceed 10 percent per year.

6. North Carolina drivers are also seeing their gas taxes fall, but only temporarily and not by as much as would have otherwise been the case.  Under a bill signed by Gov. Pat McCrory, gas tax rates fell by 1.5 cents on April 1 and will drop by an additional penny on both January 1 and July 1 of next year.  This gradual 3.5 cent cut is less than half the full 7.9 cent cut that otherwise would have taken effect this summer.  Additionally, lawmakers also agreed to swap out their price-based gas tax formula in favor of allowing the tax rate to grow alongside population and the general inflation rate—a change they think will generate a more substantial, predictable stream of revenue in the years ahead.

It is likely that more states will follow the lead of these half dozen states before 2015 legislative sessions come to a close.  Our earlier surveys identified eight states in particular that are also giving the idea careful consideration: Idaho, Michigan, Missouri, Nebraska, New Jersey, South Carolina, Vermont, and Washington State.

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