Just Taxes Blog by ITEP

Gas Taxes Rise in a Dozen States, Including an Historic Increase in Illinois

Gas Taxes Rise in a Dozen States, Including an Historic Increase in Illinois

June 27, 2019

Carl Davis
Carl Davis
Research Director

On January 1, 1990, the Berlin Wall was standing, Nelson Mandela was still in prison, and Illinois was raising its excise tax on gasoline to 19 cents per gallon. A lot has changed since 1990, but Illinois’s gas tax rate hasn’t budged.

Fast forward almost 30 years, however, and the Land of Lincoln is finally at it again. On Monday, Illinois’s gas tax rate will rise by 19 cents and its diesel tax rate by 24 cents per gallon to raise money for infrastructure improvements. Both increases are calibrated to almost exactly catch up with inflation over the last three decades.

But Illinois isn’t the only state where gas taxes will increase. On July 1, 12 states will boost their gasoline taxes and 11 will boost their diesel taxes. The reasons for these increases vary, but they’re generally intended to fund maintenance and improvement of our nation’s transportation infrastructure–a job at which Congress has not excelled in recent years. Details of these upcoming gas tax changes are as follows:

California: The gas tax will rise by 5.6 cents per gallon under the last stage of an increase approved by lawmakers in 2017. As in Illinois, California’s gas tax rate will now also be adjusted each year to keep pace with inflation. Voters were asked to repeal the 2017 law last year at the ballot box, but they decided to keep the reform intact by a margin of 57 to 43 percent.

Connecticut: The diesel tax rate will increase by 2.6 cents per gallon because the tax rate is designed to vary alongside changes in average fuel prices. Even with the increase, however, Connecticut’s diesel tax rate (46.5 cents) remains significantly below its 2013 peak (54.9 cents). Gasoline taxes in Connecticut are also partly based on the price of fuel, but that formula applies to the actual sale price and therefore the tax rate can vary continuously rather than undergoing periodic adjustments.

Illinois: The gas tax will rise by 19 cents and the diesel tax by 24 cents under legislation enacted earlier this year. But lawmakers didn’t just write a new, flat cent per gallon tax rate into the law. They also planned ahead by choosing to index the gas tax rate to inflation so that it can retain its purchasing power with small, periodic increases in the years to come.

Indiana: The gas tax will rise by 0.5 cents while the diesel tax will rise by 1 cent. Under a 2015 reform both taxes are updated annually to keep pace with inflation and the rate of personal income growth in Indiana. The gasoline tax is also partly linked to gas prices, which explains why the gas tax rate is rising by less than the tax on diesel (falling gas prices in Indiana are partly offsetting the impact of inflation indexing).

Maryland: Gas and diesel taxes will each rise by 1.4 cents per gallon because of a formula implemented in 2013 that ties the tax rate to increases in the rate of inflation and in the price of motor fuel.

Michigan: Gas and diesel tax rates vary each month in Michigan alongside changes in the price of fuel. On July 1, the gas tax will increase by 0.1 cents and the diesel tax by 0.2 cents. Looking ahead, Michigan is poised to join the growing number of states that index their fuel taxes to inflation starting in 2022.

Montana: Gas taxes are rising by 0.5 cents and diesel taxes by 0.2 cents because of a phased-in tax increase enacted in 2017. The full increase, which will amount to 6-cents for gas and 2-cents for diesel, will be completed in July 2022.

Nebraska: Gas and diesel tax rates will increase by 0.1 cents under a formula that considers both fuel prices and the legislature’s infrastructure spending decisions.

Ohio: Gas taxes will rise by 10.5 cents and diesel taxes by 19 cents per gallon under an increase enacted earlier this year. Gov. Mike DeWine also proposed indexing the state’s gas tax rate to inflation, but this reform was ultimately left out of the law. Lawmakers did agree, however, to offset some of the gas tax increase falling on lower-income drivers by boosting the state’s Earned Income Tax Credit (EITC).

Rhode Island: Gas and diesel tax rates will each rise by 1 cent per gallon under an indexing formula enacted in 2014. This marks the state’s first adjustment since July 2015. The formula allows for adjustments every two years, but no adjustment was made in 2017 because inflation was relatively low.

South Carolina: Gas and diesel tax rates will each rise by 2 cents per gallon under the third stage of a 6-part increase. These tax rates will eventually rise by a total of 12 cents per gallon because of legislation enacted in 2017.

Tennessee: The gas tax will rise by 1 cent while the diesel tax will increase by 3 cents. This is the final stage of an increase enacted in 2017 that raised gas taxes by 6 cents and diesel taxes by 10 cents overall.

Vermont: The gas tax will rise by 0.55 cents while the diesel tax rate will remain unchanged. Vermont’s gas tax is linked to the price of gas and an increase in gas prices led to this tax change.

View chart of gasoline tax changes.

View chart of diesel tax changes.



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