Fuel taxes rise in several states as Illinois hits pause

Prices are shown at a Chevron station in San Francisco on July 2, one day after California's fuel-tax increase took effect. (David Paul Morris/Bloomberg)

Automatic fuel-tax increases took effect July 1 in California, Maryland, Washington and Virginia, but Illinois suspended its planned hike.

Many states adjust motor fuel tax rates either Jan. 1 or July 1 through formulas tied to inflation or other economic benchmarks. This year, automatic consumer price index-based adjustments contributed to increased diesel and gasoline taxes in California, Maryland, Washington and Virginia.

However, Illinois drivers avoided a planned motor-fuel tax hike after state lawmakers opted to impose a six-month halt through Dec. 31.

Public Act 104-0468, adopted June 16 as a finance and tax package, put the brakes on a scheduled CPI adjustment on the state’s motor-fuel tax rate that would have increased by 2.68% the current tax rate for diesel (55.8 cents per gallon) and gas (48.3 cents).

California

The state tax in California for diesel and biodiesel rose to 48.2 cents per gallon from 46.6 cents, while gas climbed 2.2 cents to 63.4 cents a gallon due to an annual inflation adjustment.

“Families are already paying some of the highest gas prices in the country. Instead of raising taxes, we should be trying to make gas more affordable,” said Assemblyman Heath Flora (R), who spoke out recently against higher rates.

The California Department of Tax and Fee Administration published the new changes effective through June 2027. “Altogether, state taxes, fees and mandates add about $1.20 to every gallon of gas sold in California, costing the average driver hundreds of dollars each year,” the assembly noted in a joint statement issued June 24 with Flora. “That’s before accounting for global supply and demand or state policies that have contributed to refinery closures and reduced in-state fuel production.”

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Flora 

The yearly tax hike is due to a 2017 law, which California Assembly Republicans noted has more than doubled since then. They blamed state Democrats for California having the nation’s highest state gas taxes, while their Republicans peers have fought unsuccessfully to suspend the motor fuel tax.

“The gas tax is only part of the cost. On top of the excise tax, Californians pay roughly 13 cents in state and local sales taxes, about 24 cents for cap-and-trade, roughly 20 cents for the Low Carbon Fuel Standard and another 2 cents for the underground storage tank fee,” the Republicans said.

At the start of this year, the average state tax rate for a gallon of diesel was 35.5 cents and 33.27 cents for gasoline, according to the U.S. Energy Information Administration. These average rates include environmental taxes, excise taxes, inspection fees and special taxes.

Maryland

The comptroller’s office in Maryland rolled out the new higher motor fuel rates based on annual adjustments linked to the CPI changes. This yearly recalculation in the state’s tax legislation formula is based on 2013 legislation enacted by the Maryland General Assembly. As of July, per-gallon tax rates are 47.45 cents for diesel and biodiesel (0.7 cents higher) and 46.6 cents for gasoline and gasohol (0.6 cent higher).

As with California, the state’s Republicans took aim at Maryland Democrats over the increases.

“Republicans have endlessly fought to stop the automatic hikes, cut the tax, or even just temporarily suspend it while Maryland families face unusually high prices at the pump,” the state Republican Party noted.

Virginia

Motor fuel taxes now are also slightly higher in Virginia than earlier this year.

As of July 1 through June 30, 2027, the rates per gallon for diesel are 33.6 cents (from 32.7 cents) and 32.6 cents for gas (from 31.7 cents), according to the Virginia Department of Motor Vehicles.

Washington

The annual automatic higher fuel tax rates also took effect in Washington for the first time after legislation mandated the increases to fund roads and bridges.

The yearly increase is tied to a 2% inflation adjustment beginning every July.

Diesel is now taxed at 59.5 cents per gallon compared with the previous annual rate of 58.4 cents a gallon.

The gasoline tax also nudged to 56.5 cents a gallon from 55.4 cents.

The Washington Policy Center noted that state gas taxes rose 6 cents last year to the 55.4-cent rate, plus about 50 cents from state climate fees. “As a result, Washington residents pay among the highest gas prices in the country, frequently more than a dollar per gallon above other states,” the center noted. “Washington may need additional resources to tackle its maintenance backlog, but it also needs to prioritize its spending and maximize the value provided to taxpayers.”