Ten states implement fuel rate changes on July 1

By Keith Goble, Land Line state legislative editor | 6/30/2017

The first of July marks changes in fuel tax collections in 10 states.

South Carolina is increasing the state’s 16.75-cent diesel and gas rates by 2 cents. Unchanged since 1987, the tax rates will continue to rise annually by 2-cent increments through 2022. At that time, the tax rate will top out at 28.75 cents.

The state Department of Transportation expects to collect about $150 million in the first year. When fully implemented, the tax is estimated to raise more than $600 million annually.

In Tennessee, the state’s 21.4-cent gas rate and 18.4-cent diesel rate are being raised for the first time since 1989. The fuel rates are up 4 cents each. The rates will continue to rise by 2 cents and 6 cents over the next two years. When fully effective, the tax rates will reach 27.4 cents and 28.4 cents, respectively.

The tax increases are expected to raise an additional $250 million per year.

Multiple vehicle fees are also increasing the first of the month, including a $20 boost in the registration taxes for large trucks.

Montana’s 27-cent gas tax and 27.75-cent diesel tax are headed up. Precisely, as of July 1 the gas rate is up 4.5 cents to 31.5 cents. The diesel rate is up 1.5 cents to 29.25 cents. The tax rates for gas and diesel will each be increased another 1.5 cents and one-half cent by 2023.

In West Virginia, Gov. Jim Justice recently signed into law a bill to raise fuel taxes and vehicle fees. The changes take effect on Saturday.

Approved during a special session, the plan raises the state’s fuel tax rate by 3.5 cents. Specifically, the variable component based on wholesale price increases from a minimum of 11.7 cents per gallon to 15.2 cents. The flat portion of the fuel tax will remain at 20.5 cents

The motor vehicle sales tax, or privilege tax, will be raised from 5 percent to 6 percent.

Various fees imposed by the state Department of Motor Vehicles will also be increased.

In all, the tax and fee increases are estimated to raise about $130 million yearly.

New Jersey is completing the second of a two-part fuel tax increase that began in Nov. 2016. At that time, the gas tax increased from 14.5 cents to 37.5 cents. On Jan. 1, 2017, the diesel rate was raised from 17.5 cents to about 36.5 cents. Another 8-cent increase on diesel took effect July 1. The rate now is set at 44.5 cents per gallon.

Also in Indiana, the state’s 18-cent-per-gallon gas tax and the 16-cent diesel tax are increased by 10 cents. In addition, the state’s 11-cent surcharge tax on diesel nearly doubles to 21 cents. Tax rates will also be indexed on an annual basis through 2024. Annual adjustments will be capped at one penny.

Fuel tax rates are changing in four more states due to previous actions taken by state lawmakers.

California’s gas tax is increasing by 1.9 cents while the diesel rate remains unchanged. The change is a prelude to a 12-cent gas tax increase and 20-cent diesel tax boost that takes effect on Nov. 1 due to legislation enacted this year.

Maryland’s fuel tax rates will be raised by 0.3 cents due to a four-year-old inflation indexing law. The gas tax will be set at 33.8 cents while the diesel rate will become 34.55 cents.

In Iowa, the gas tax is actually headed down by 0.2 cents to 30.5 cents. The 32.5-cent diesel rate will stay the same.

The rates are based on a fuel distribution percentage formula.

Across the state line, Nebraska is trimming its 28.2-cent gas rate and 27.6-cent diesel rate by 0.3 cents per gallon each. The change is due to a law linking the state rates to the price of fuel.

The state tax is made up of three components: the variable tax, fixed tax and wholesale tax. The variable and wholesale rates are adjusted twice annually. A separate petroleum release remedial action fee is not included in the state tax rates.

The one-third-cent dip in the state’s tax rates is a result of continued low fuel prices and a six-month adjustment in the wholesale tax rate.

This week’s change follows an increase of 1.5 cents on Jan. 1. Additional increases of 1.5 cents are set for each of the next two Januarys.

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