DALLAS – State gasoline taxes went up in Washington and Maryland on July 1, while fuel tax levies fell in three states with the advent of fiscal 2017.
Fuel taxes in another three states that are based on the retail price of gasoline rather than per-gallon levy would have gone down if they hadn't already reached their legal minimum rate due to drops in fuel prices.
More than 20 states have gone for 10 years or more without raising their gasoline tax, said Carl Davis, transportation research director at the Institute on Taxation and Economic Policy.
The gasoline tax is the primary funding source for most state highway agencies, but a decade or more of inaction on the gasoline tax has left many state transportation budgets in disarray as transportation officials try to cover the rising costs of asphalt, construction equipment and other expenses with an obsolete tax rate, Davis said.
Many of the 31 states with a fixed rate gas tax have gone years or even decades without a change in the rates, Davis said.
Tennessee has not adjusted its gasoline tax in 27 years, while New Mexico's fuel tax rate is 23 years old and Montana's is 22 years old, he said.
"If the gas tax is going to provide an adequate amount of revenue to fund transportation in the medium- and long-term, the tax rate needs to be periodically adjusted to at least keep pace with the rate of growth in the cost of infrastructure maintenance and construction," Davis said. "State gas tax rates that have gone 10 to 20 years or more without an increase clearly do not live up to this bare minimum test of sustainability."
A growing number of states have recognized the problem with this approach and have switched to a variable rate gas tax, Davis said.
"A majority of Americans live in a state where the gas tax is automatically adjusted in this way," he said.
Washington's state gasoline and diesel tax went up 4.9 cents on Friday, bringing the total levy to 49.9 cents per gallon. The rate is the highest in the U.S., with New York second at 42.3 cents per gallon and Hawaii third at 41.99 cents.
Maryland's gas tax rate rose by 0.9 cents, the final stage of a transportation funding reform package approved by the General Assembly in 2013.
Fuel tax rates fell July 1 in Nebraska, North Carolina, and California.
Similar declines would have been posted in Kentucky, Vermont, and Virginia, but their rates have already reached the minimum specified in law due to a lengthy decline in gasoline prices.
The average price of gasoline in the U.S. of $2.31 per gallon is down 47 cents from July 2015, said Michael Green, a spokesman for AAA.
Gasoline demand is at an all-time high, he said.
"Pump prices are holding relatively steady and remain at their lowest levels for this time of year since 2005," Green said. "This year's summer driving season is likely to set new records for both gasoline demand and vehicle miles traveled."
California's gasoline tax, which is based on fuel prices, fell by 2.2 cents on July 1, the third cut in the rate in three years. The reductions have lowered the state fuel tax by 11.7 cents since 2013.
The price-based portion of California's gasoline tax dropped to 9.8 cents per gallon on July 1 as a result of fuel price declines over the past 12 months.
California's state gasoline tax is expected to bring in $4.5 billion in fiscal 2016, a drop of 16% from 2015 collections and 21% less than in 2014. State officials expect fuel tax revenues to drop another 6.5% in fiscal 2017.
