An Overview of the January 2024 Diesel Tax Adjustments by State
January 25, 2024
The start of the year brings adjustments to diesel taxes in several states, closely aligned with the release of state budget proposals. In January 2024, sixteen states witnessed changes in their diesel tax rates, with the majority experiencing modest adjustments of around one cent or less. While a majority of states maintained the status quo, others demonstrated unique or standard approaches to taxation, either increasing or decreasing their rates.
Diesel Fuel Tax Upward Rate Adjustments
Florida, Georgia, Nebraska, New York, and North Carolina saw minimal adjustments to their diesel tax rates, all hovering around one cent or less. These adjustments were made automatically, reflecting the states' commitment to periodic adjustments based on predetermined criteria.
Other states utilize automatic adjustments based on a percentage of the wholesale fuel price, a combination of a percentage of fuel price and a flat excise tax, or their own calculation method. For example, Michigan adjusts their diesel fuel taxes to the consumer price index. As a result, Michigan experienced a slight increase of 1.4 cents, bringing the total diesel fuel tax rate to 51.2¢ per gallon. In Oregon, the tax rate was raised by 2¢ per gallon, reaching a total of 40¢ per gallon.
West Virginia uses a distinctive dual-rate system for its diesel fuel tax, with both fixed and variable rates. In 2024, the flat rate will remain the same at 20.5¢ while the variable rate will decrease by 1.5¢ to 15.2¢, resulting in a combined rate of 35.7¢ per gallon.
California continues to lead the nation with the highest diesel fuel tax rate. In 2023, the state increased its international fuel tax agreement (IFTA) state diesel fuel tax twice, culminating in a rate exceeding $1 per gallon. The most recent increase, implemented on October 1st, pushed the tax rate to an all-time high of $1.089 per gallon. However, the most recent adjustment resulted in a modest decrease to reflect a rate of $1.042 per gallon. Considering the January adjustments, the current tax rate signals California's commitment to promoting cleaner and more sustainable energy sources by discouraging conventional fossil fuel use.
Diesel Fuel Tax Downward Rate Adjustments
While some states experienced an upward trajectory, Pennsylvania witnessed a 4.4 cents per gallon diesel fuel tax rate decrease. This reduction was a result of a 2013 law that lifted the cap on the oil company franchise tax, which includes a provision preventing the average wholesale price from falling below $2.99 per gallon. Moving forward, the rates for 2024 will remain consistent with the rates set between 2018 to 2022.
Diesel Fuel Taxes Continue to be a Crucial Element in a Market-based Fuel Reimbursement
As we navigate the ever-evolving landscape of diesel fuel taxes in the U.S., the January 2024 adjustments reflect a mix of automatic changes, unique state-specific approaches, and ongoing efforts to shape energy consumption towards more environmentally friendly alternatives. Diesel fuel taxes remain a critical component of a market-based fuel reimbursement calculation. By considering the variance by state and the way carriers pay fuel taxes, fuel reimbursements to carriers are fair and accurate.
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