Six states raise gas taxes July 1 to pay for transportation projects

Six states will raise their gasoline tax rates on July 1, and while some drivers may view this as unwelcome, most of these increases are simply playing catch-up with inflation after years without an increase in the gas tax rate, an analyst said.

“These increases will fund infrastructure improvements that directly benefit drivers and other travelers, an especially important step at a time when Congress’ commitment to adequately funding infrastructure remains highly uncertain,” said Carl Davis, research director with the Institute on Taxation and Economic Policy (ITEP). 

Federal road projects are funded by the Highway Trust Fund, which is due to expire at the end of the month.

The largest gas tax increases are taking place in Idaho at 7 cents per gallon, and Georgia with 6.7 cents for gas and 7.7 cents for diesel. Each of these increases is occurring due to legislation enacted earlier this year. 

Maryland’s increase of 1.8 cents per gallon is a result of legislation signed by former governor Martin O’Malley in 2013. Rhode Island’s 1-cent increase is the first automatic update for inflation to take place under a law signed by former Gov. Lincoln Chafee in 2014. Finally, Nebraska’s 0.5-cent hike and Vermont’s 0.35-cent increase are automatic changes resulting from these states’ variable-rate gas tax structures.

“The average driver buys about 524 gallons of gas a year,” Davis said. “Seven cents is about $37 a year in Idaho, $35 in Georgia. That $37 investment means it’s less likely you’ll blow a tire, or your suspension, both of which will cost a lot more than $37 to fix.”

In Atlanta, Davis said the tax increase will be used to improve roads and reduce traffic congestion.

Davis quoted a recent study conducted by Texas A&M University that estimates the average driver spends 38 hours a year stuck in traffic, at a cost of approximately 19 gallons of gasoline a year. 

Davis said by contrast, the gasoline tax rate will fall by 6 cents in California and the diesel tax rate will drop by 4.2 cents in Connecticut because of laws linking those states’ gas tax rates to gas prices. Davis said a unique quirk in California’s law will cause the diesel tax to rise by 2 cents.

“These cuts will reduce the level of funding available for transportation at a time when basic infrastructure maintenance is already lagging far behind,” Davis said.

Earlier this year, similar automatic cuts had been scheduled to take place in Kentucky and North Carolina, but lawmakers in both of these states wisely intervened by placing a “floor” on their gas tax rates that minimized the loss of infrastructure revenue.