Here’s a look at some of the recent gas tax changes across the country.
Increased gas taxes can create a serious economic disadvantage for small businesses, especially those that depend on fleet vehicle operations.
NFIB recently balloted members nationally about whether Congress should pass a 25-cent per gallon federal gas tax increase to fund infrastructure, and a whopping 63 percent said no.
“The majority of our members and small business owners nationwide have a real problem with heaping more taxes on struggling job creators,” says John Kabateck, NFIB’s state director in California.
Despite small business opposition to increased gas taxes, 30 states have raised or adjusted their gas taxes in the last decade, and many states have opted for variable-rate tax structures to keep consistent revenue growth over time, according to the Institute on Taxation and Economic Policy. So far in 2019, Alabama, Arkansas, California, Illinois, Ohio, and Virginia have increased state gas taxes, according to the National Conference of State Legislatures.
Here’s how the most recent gas tax changes affect businesses in several states, and what other states can anticipate in the near future.
Alabama’s Three-Year Gas Tax Increase
In Alabama, the gas tax is rising by 10 cents per gallon over the next three years—the first increase since 1992. The first 6-cent increase will start Sept. 1, 2019—bringing the total to 24 cents per gallon for gas and 25 cents per gallon for diesel—followed by an additional 2-cent increase on Oct. 1, 2020, and a final 2-cent increase on Oct. 1, 2021.
Then, on Oct. 1, 2023, and on July 1 of each year after, the gas and diesel tax rate will be adjusted according to the change in the yearly average of the National Highway Construction Cost Index, rounded to the nearest whole cent with the increase or decrease of the excise tax rate not exceeding 1 cent per gallon.
Arkansas’ Gas Tax Set to Increase Annually
In Arkansas, the tax will increase by 3 cents per gallon for gasoline and 6 cents per gallon for diesel as of Oct. 1. Annual increases will be calculated based on the average wholesale price of fuel for the previous calendar year.
California’s Gas Tax the Highest in the Country
As of July 1, California has the highest gas tax in the country. This latest increase of 5.6 cents per gallon is part of Senate Bill 1, which Gov. Jerry Brown signed into law in 2017. S.B. 1 also mandated a 12-cents-per-gallon increase for gas and a 20-cent-per-gallon increase for diesel in 2018.
“Small business owners absolutely can’t absorb these increases as they struggle to survive in this state,” Kabateck says.
Kabateck says NFIB members already feel the pain from the increased price at the pump. It’s forcing them to make difficult decisions about raising prices and cutting benefits, as well as giving them one more reason not to expand or hire more workers.
“More and more of them are trying to find the exit door out of California,” he says.
Illinois’ Gas Tax Increase in Effect
The gas tax in Illinois increased by 19 cents per gallon as of July 1, after which annual increases are indexed to inflation.
Ohio’s Gas Tax Increase to Fund Roads and Bridges
Beginning July 2019, Ohio’s gas prices increased by 10.5 cents per gallon for gas and 19 cents per gallon for diesel. The tax increases will generate $865 million in new dollars for maintenance and new construction on roads and bridges.
Virginia’s Gas Tax Increase Won’t Affect Entire State
Virginia’s new 2.1 percent gas and diesel tax increase on the average wholesale price of fuel only affects a part of the state, specifically districts along the Interstate 81 corridor. The increase went into effect on July 1. In 2021, the diesel tax also will increase by 2.03 percent of the statewide average wholesale price per gallon.
Other States Debate Increases
Many other states also are considering gas tax changes, including Hawaii, New Hampshire, and Wisconsin. In Michigan, Gov. Gretchen Whitmer called for a 45-cent gas tax increase, but this effort has stalled.
NFIB will continue to track gas tax increases throughout the year. To keep up with state-specific updates, visit NFIB.com/Advocacy/Choose-Your-State and select your state.
