Diesel Tax Set to Increase in Many States, Including a 10-Cent Bump in Wyoming

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The diesel fuel tax will increase in a number of states across the nation  July 1, while Virginia and Maryland will begin charging new sales taxes that also will increase the cost of fuel.

In Wyoming, the tax on diesel and gasoline will increase 10 cents a gallon, bumping the state’s 14-cent fuel tax to 24 cents.

Connecticut on July 1 will reinforce its reputation for high fuel taxes by raising them even higher.

“It’s higher than anybody’s; it’s embarrassingly high,” said Michael Riley, president of the Motor Transport Association of Connecticut.

The diesel tax there will rise 3.7 cents to 54.9 cents a gallon, and the gasoline tax will increase 4 cents to 51 cents, Riley said.

Connecticut ties its gasoline tax to a formula based on gross tax receipts. Diesel is taxed by the gallon.

Elsewhere, North Carolina’s diesel tax will rise to 37.6 cents a gallon from 37.5 cents, and Nebraska’s will go to 26.3 cents from 24.6 — the result of state laws that index the fuel tax to rising prices overall. In addition, Vermont’s diesel tax will increase 2 cents to 31 cents a gallon.

California’s diesel tax will decline a penny — from 39 to 38 cents — because it has a complex tax system based on a combination of changing sales and fuel taxes.

The changes in Maryland, Virginia, Wyoming and Vermont, however, resulted from legislative action this year as states struggled to find transportation revenue to replace shrinking federal support.

“It’s certainly been really great to see a lot of traction at the state level because it brings that transportation investment dialogue, that public consciousness, that, frankly, doesn’t happen very often,” said Joung Lee, associate director for finance and business development for the American Association of State Highway and Transportation Officials.

However, the new funding plans didn’t happen overnight, Lee said. Instead, it took multiple attempts before lawmakers finally acted.

Wyoming lawmakers took about nine legislative sessions before they finally decided earlier this year to raise the fuel tax to generate road money, the state’s Department of Transportation Director John Cox said during a filmed interview for AASHTO’s news network.

“I think the reason it happened was the reality finally set in that we were getting further and further behind in terms of the condition of our infrastructure,” Cox said.

Maryland and Virginia also approved plans that raise the cost of diesel, but the plans also depend on Congress passing legislation that allows states to collect Internet sales taxes.

In Maryland, Gov. Martin O’Malley (D) signed a bill May 16 that phases in a sales tax on gasoline and diesel — 1% beginning July 1, rising to 3% by 2015, provided Congress passes the Internet bill.

“Basically, if Congress doesn’t take action on the Internet sales tax by 2015, then we get the rest of the tax,” said Louis Campion, president of Maryland Motor Truck Association, which opposed the plan.

If the bill — which was passed by the Senate but stalled in the House — fails, the sales tax will be 5% in 2016.

The new plan also indexes the diesel tax, meaning it could rise annually with the consumer price index. Together, the 1% sales tax and the indexing will add 3.8 cents to the state’s 24.25-cent diesel tax this year, Campion said.

Virginia’s $6 billion transportation plan, signed by Gov. Bob McDonnell (R) in March, also rests on the Internet sales tax bill.

Virginia’s 17.5-cent per gallon tax on diesel and gasoline disappears July 1, replaced by a wholesale fuel tax — 6% for diesel and 3.5% for gasoline. Unlike the per-gallon tax it replaces, though, the wholesale tax is indexed to statewide wholesale fuel prices.

And if the Internet sales tax does not pass by January 2015, the wholesale gasoline tax will be 5.1%, Virginia Secretary of Transportation Sean Connaughton said.

“We have tremendous confidence in the Congress of the United States to get legislation through shortly,” he said.

In addition to the wholesale fuel tax, the state’s general sales tax will increase July 1 — from 4% to 4.3% — to help fund transportation.

“We were very dependent on the very fragile motors fuels tax,” Connaughton said. “Now it’s a much broader structure that we believe will weather the changes in people’s driving habits and fuel consumption and vehicle standards.”