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Gas Prices Are Down, but New State Gas Taxes Aren't Helping

Eight states have raised taxes on gasoline this summer. Learn if you're impacted by the new hikes.

Sign warning of gas tax increase
The start of the fiscal year in July brought several new state gas taxes.
Jim Vallee/Getty Images

Gas prices in the US finally dipped under the $4 per gallon average nationally this week for the first time since March 2022, a welcome sign for families hit hard by inflation. In some states, however, new increases in gas taxes have taken a bite out of those fuel savings.

In July 2022, eight states raised gas taxes. The hikes took effect at the start of the 2023 fiscal year, and most were scheduled long before soaring inflation and the current gas price crisis started.

Other states have gone the other way with "gas tax holidays." Kentucky Gov. Andy Beshear suspended the state's 2-cent-per-gallon increase until January 2023, reportedly saving Kentuckians about $35.4 million. And Georgia Gov. Brian Kemp extended the state's pause on taxes for diesel and gasoline until Sept. 12, 2022.

Read on to see where gas taxes have risen and how much more motorists are paying. For more, get quick tips for saving money on gas and learn how to drive smarter to save fuel.

California

Though Gov. Gavin Newsom was able to repeal California's diesel fuel tax as part of a compromise with state lawmakers, he couldn't stop a 2.8-cent gas tax increase that went into effect on July 1, taking the state's gas excise tax to 53.9 cents per gallon, the highest in the nation.

It's not surprising Californians pay more for gas than any other state -- about $5.38 a gallon as of Aug. 12. That's a dip from the $6.10 reached a month ago but still almost a dollar more than it was a year ago.

Newsom had wanted to suspend the gas tax, but Democratic lawmakers insisted that it pays for critical road and infrastructure projects. Instead, the diesel tax is being suspended and residents will receive "inflation relief" checks of up to $1,050 per family.

Connecticut

On July 1, Connecticut's diesel tax rose nearly 23%, from 40.1 cents a gallon to 49.2 cents. The hike comes six months before the state is slated to implement a new highway use tax on large commercial trucks, the Connecticut Mirror reported. The tax is estimated to generate $90 million annually.

The cost of diesel in Connecticut has nearly doubled in the last year, from $3.30 in July 2021 to $6.19 in early June 2022. As of Aug. 12, it's ratcheted down to $5.33 a gallon.

Gov. Ned Lamont suspended the state's 25-cent-per-gallon excise tax on gasoline. The pause was initially supposed to expire June 30 but has been extended through Nov. 30.

Illinois

In 2019, Illinois lawmakers and Gov. J.B. Pritzker doubled the state's gas tax to fund road improvements, taking it from 19 cents per gallon to 38 cents. Illinoisans now pay the third-highest gas taxes in the nation after Pennsylvanians, who pay 58 cents per gallon, and Californians, who shell out 53.9 cents.

Since then, the excise has inched up to 39.2 cents a gallon -- and it was on track to go up again to 41.1 cents on July 1. But Pritzker suspended the increase through the end of the year. (He's even required gas stations to advertise the pause or pay a hefty fine.)

Instead, in 2023, there will be two fuel tax hikes: The delayed one will kick in on Jan. 1 and the regular annual increase will take effect on July 1, ultimately bringing the gas excise up to 45.2 cents a gallon.

On Aug. 12, a gallon of gas in Illinois averaged $4.31, according to AAA.

Indiana

Motorists in Indiana are now paying 62 cents a gallon in taxes on gasoline, according to the Indiana Department of Revenue, up from a record high of 56 cents per gallon in June.

The state actually levies two separate taxes on gasoline: A 7% sales tax and a 32-cents-per-gallon tax aimed at funding road projects.

The sales tax, calculated monthly, just went up to 29.1 cents a gallon, an increase of more than 5 cents from June and nearly triple what it was in early 2021, according to WFYI. The infrastructure excise went up 1 cent a gallon, as part of an automatic inflationary increase.

On Aug. 12, unleaded gasoline averaged $3.88 a gallon in Indiana, slightly below the national average.

Maryland

Maryland paused its 36.1-cents-a-gallon tax on gasoline from March 18 to April 16. But after it resumed, it actually went up almost 7 cents on July 1 to 42.7 cents per gallon. The 18% increase is thanks to an automatic annual increase mandated by state law.

State Comptroller Peter Franchot has called for another three-month gas tax holiday, which would save a two-car household more than $150, according to Baltimore station Fox 45.

A gallon of unleaded gasoline in Maryland averaged $3.95 on Aug. 12.

Missouri

After leaving the state's gas tax untouched for nearly a quarter century, Missouri lawmakers passed legislation in October that gradually increases the state's gas tax by 12.5 cents by July 2025. 

In October, the levy increased by 2.5 cents to 17 cents. It then went up another 2.5 cents, to 19.5 cents, on July 1. By the 2025 deadline, the retail gas tax will be 29.5 cents a gallon.

The increased tax will ultimately net the state an estimated $500 million for infrastructure projects, according to KSDK in St. Louis. But the increase is fully refundable for most motorists -- if they keep their receipts and submit them to the Missouri Department of Revenue website. Drivers can start submitting gas receipts from October 2021 through June.

On Aug. 12, gas in Missouri averaged $3.58 a gallon, according to AAA.

South Carolina

In 2017, the South Carolina legislature overrode a veto by Republican Gov. Henry McMasters to pass an increase to the state gas tax by 2 cents a gallon every year through 2022. 

The final increase on July 1 raised the tax from 26 to 28 cents a gallon.

The state collected nearly $900 million through March from the tax, according to the South Carolina Department of Transportation. The funds support road and bridge work.

As of Aug. 12, gas in South Carolina averaged $3.53, well below the national average.

Virginia

Virginia's gas tax rose 7% on July 1, the result of legislation signed by Gov. Ralph Northam in 2020 to fund road projects.

The increase works out to about 2 cents a gallon, raising the excise from 26.2 cents a gallon to 28 cents.

Michael O'Conner, president of the Virginia Petroleum and Convenience Marketers Association, told WSET on June 30 that it might take some time to see the price difference at the pump.  

"The gas that's in the stations today [Thursday] will be taxed at the old rate, and it's going to take some time for that product to be moved through the system and to be sold at retail," O'Conner said. " So, you're probably not going to see that change immediately."

A bill sponsored by state Sen. Steve Newman to suspend the state's gas tax for three months was killed in June.  

On Aug. 12, a gallon of unleaded in Virginia averaged $3.78, according to AAA

For more on the gasoline crisis, find out which states have suspended their gas taxes and which are issuing gas rebates to residents.