States Revamping Fuel Tax Rates

By Published On: June 29, 2023Categories: Daily Market News & Insights

States across the country are taking action to revamp fuel tax rates as they grapple with transportation funding needs and rising costs. The moves aim to handle rising transportation expenses and secure funding for necessary infrastructure developments.

Since January 2023, the average state taxes and fees imposed on gasoline and diesel fuel averaged $0.3163 and $0.3388 per gallon, respectively, according to the EIA’s federal and state motor fuels taxes chart. Interestingly, these tax rates have already increased in 13 states since July 2022. And there’s more to come. In today’s article, we’re discussing the details of new tax revisions taking effect on July 1, 2023, across some states.

Source: EIA


Beginning July 1st, a scheduled fuel tax increase will take effect in California, coinciding with the start of the new fiscal year. This annual increase will add an extra $0.03 per gallon of diesel and $0.04 for gasoline, making the current taxes rate the highest in the country, hitting $0.441 and $0.579, respectively.

The revenue generated from this tax contributes to highway and road improvement projects.


Indiana residents can expect a small fuel tax rate increase, set to up to $0.01 for gas and $0.02 for diesel, effective on July 1. This adjustment is a result of an update in the transportation funding law implemented in 2017, which gradually raises gas and diesel taxes. According to the new structure, the gasoline tax will see an increase from the current rate of $0.33 to $0.34 per gallon, while diesel will hike from $0.55 to $0.57.

The law stipulates annual adjustments until 2024 to accommodate the growing demands of the transportation sector and infrastructure development.


Illinois drivers are facing two gas tax increases in 2023. The first one, implemented on January 1, raised the tax on a gallon of gas by $0.32 cents. Currently, the State Motor Fuel Tax stands at $0.42 per gallon of gasoline and $0.49 per gallon of diesel fuel until June 30. However, effective July 1, 2023, the taxes will rise to $0.454 and $0.529 per gallon, respectively.



The government of Kentucky has declared that there will be a rise in both gasoline and diesel taxes, amounting to approximately $0.02 cents per gallon, effective from July 1st. The increase will lead to a tax rate of $0.257 per gallon of diesel and $0.287 per gallon of gasoline. The governor shared this news on Twitter, highlighting that the state motor fuel taxes had been frozen last year but were not extended by the General Assembly.



Maryland motorists will also face a motor fuel tax increase. The state tax rate per gallon of gas will rise to $0.470 cents, a more than 10% increase compared to the current rate. Over the past two years, the rate has increased by 30% due to inflation and rising fuel prices. Diesel vehicle owners will also experience a similar hike, with the state diesel tax increasing from nearly $0.43 cents per gallon to $0.4775 cents per gallon. The revenue generated by the tax will be allocated to funding statewide road and highway projects.



Missouri drivers will also experience higher fuel prices as the state implements an increase in motor fuel tax rates, changing from $0.22 to $0.245.


Rhode Island

On July 1st, Rhode Island will join the list of states raising their motor fuel tax, with an increase of $0.03. The tax will rise from $0.34 to $0.37.



In Utah, the government has approved tax cuts that include a significant change to the state’s fuel tax rate. The law, known as HB301, aims to provide financial relief to residents by introducing adjustments to vehicle registration fees, which will increase by $7. From July 1 until December 31, 2023, the motor and special fuel tax rates will decrease to $0.345 cents per gallon. However, the law outlines a phased increase in fuel tax rates, with projections indicating a rise to as high as $0.42 cents per gallon by 2028.


Drivers in Virginia will also see an increase in fuel prices starting July 1st. The state announced a bump of $0.01 per gallon of gasoline and $0.02 for diesel, resulting in tax rates of $0.298 and $0.308, respectively.

Federal Taxes

According to the Energy Information Administration (EIA), federal fuel taxes remain unchanged at $0.183 per gallon for gasoline and $0.243 per gallon for diesel. However, there is an additional federal fee of $0.001 per gallon from the Leaking Underground Storage Tank (LUST) Fund, contributing to the total federal tax amount.

Under the 2022 Inflation Reduction Act, the Hazardous Substance Superfund financing rate has been reintroduced for domestic crude oil and imported petroleum products, which is paid by refinery operators and importers. These Superfund taxes consist of a $0.09 per barrel ($0.002 per gallon) Oil Spill Liability Trust Fund (OSLTF) tax and a $0.164 per barrel ($0.004 per gallon) Hazardous Substance Superfund tax. It is worth noting that the Hazardous Substance Superfund tax rate, which expired in 1995, has been revived and will be adjusted annually to accommodate inflation.

This article is part of Daily Market News & Insights


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