By Blair Lozier
In 2019 — the latest year for which national statistics are available — state and local governments collected $52 billion in motor fuel taxes. State laws and regulations often mandate that portions of this revenue will be allocated to support specific programs. From 2015-2019, most of the motor fuel tax revenue was used for state administered highways, local roads and streets and mass transit. The most popular approach, taken by 20 states, is to direct funds to transit and active transportation (pedestrian and bicycle projects). The second most common approach is to allocate funds to law enforcement and safety services. Less frequently, funds are directed to education, tourism and environmental programs.
Fuel taxes are assessed in a variety of ways. As of 2019, 22 states structured their tax systems around a variable-rate method — the tax rate fluctuates based on wholesale gas prices, the price at the pump, the inflation rate or other factors. Ten states — California, Colorado, Florida, Illinois, Maryland, North Carolina, Rhode Island, Utah and Virginia — and Washington, D.C. have motor fuel tax systems that adjust for inflation or the Consumer Price Index (CPI). Ten other states — Connecticut, Kentucky, Maryland, Nebraska, New Jersey, New York, Pennsylvania, Utah, Vermont and West Virginia — use the price of gasoline to determine the tax rate.
Last week, President Biden urged Congress to suspend the federal gas tax in response to sustained high prices. Biden also called for states to consider suspending their taxes.
CSG has conducted a scan of actions states are implementing or considering in order to provide relief from high gas prices, including compensation programs and gas tax suspensions — often referred to as motor fuel tax holidays.
Option 1: Direct Compensation
Delaware has enacted a compensation program to provide funds directly to consumers.
State Motor Fuel Tax Compensation Programs
|Delaware||The enacted 2022 Delaware Relief Rebate Program is a one-time payment of $300 per Delaware resident taxpayer.|
Option 2: Motor Fuel Tax Holiday
Many states have proposed or enacted a motor fuel tax holiday. A holiday is a period where taxes are suspended.
Enacted State Motor Fuel Tax Holidays
|State||Description of Fuel Tax Holiday|
|Colorado||Lawmakers enacted a delay of the increase in usage fees and temporarily reduced prices.|
|Connecticut||The suspension of motor fuel taxes is in place from April 1 to June 30.|
|Florida||The motor fuel tax will be suspended from Oct. 1 to Oct. 31.|
|Georgia||The governor originally suspended the motor fuel tax from March 18 to May 31. The suspension has been extended until July 14.|
|Maryland||The state legislature passed a 30-day period beginning March 18, 2022. Legislators are working on a proposal for another 90-day suspension.|
|New York||The state fuel tax has been reduced and counties will cap the amount of tax that can be collected per transaction.|
Proposed State Motor Fuel Tax Relief
|State||Relief Type||Description of Proposed Relief|
|Alaska||Motor Fuel Tax Holiday||Suspending the motor fuel tax until June 2023|
|California||Compensation Program||Implementing a $400 rebate per registered car for up to two cars for every household Implementing free public transit for three months|
|Idaho||Motor Fuel Tax Holiday||Implementing a six-month tax holiday|
|Illinois||Motor Fuel Tax Reduction||Reducing the motor fuel tax beginning July 1|
|Michigan||Motor Fuel Tax Holiday||Suspending the motor fuel tax|
|Minnesota||Motor Fuel Tax Holiday||Reducing the motor fuel tax cut from Memorial Day to Labor Day|
|Mississippi||Motor Fuel Tax Holiday||Suspending the motor fuel tax for six months|
|Missouri||Motor Fuel Tax Holiday||Suspending the motor fuel tax for six months|
|New Jersey||Compensation Program||Implementing a $250 tax rebate for individuals filing single and $500 tax rebate for married-filing couples Implementing free public transit for three months|
|Rhode Island||Motor Fuel Tax Holiday||Suspending the motor fuel tax until the end of calendar year 2022|
|Pennsylvania||Motor Fuel Tax Reduction||Reducing the motor fuel tax by 33%|
|Virginia||Motor Fuel Tax Holiday/Reduction||Implementing a three-step relief program: Step 1: Eliminate the statewide motor fuel tax from May 1 to July 31 Step 2: Reduce the statewide motor fuel tax by 50% from August 1 to August 31 Step 3: Reduce the statewide motor fuel tax by 25% from Sept. 1 to Sept. 30|