States Raise Gas Taxes as Drivers Stay Home

New Jersey is among the states trying to compensate for lower revenue amid reduced driving.

October 02, 2020

TRENTON, N.J.—New Jersey increased its fuel tax from 30.9 cents to 40.2 cents a gallon for gasoline and 34.9 cents to 44.2 cents per gallon for diesel to generate more revenue for road repair, USA Today reports. With fewer miles being driven because of COVID-19, some states are jacking up their fuel taxes to make up for lost revenue.

For New Jersey, the shortfall in the state’s transportation trust fund triggered an automatic gas tax increase, as demand for fuel hovers around 15% less than normal, according to oil analysts. Overall, motorists are paying less at the pump because of the pandemic, with the national average cost of a gallon of gasoline at $2.18 this week—down 49 cents from 2019, according to AAA.

“Gas prices are low, and so that presents a big opportunity for politicians that are looking at very grim [revenue] numbers,” said Patrick DeHaan, who leads petroleum analysis for GasBuddy.

On average, states tack on an additional 36.4 cents a gallon in fuel taxes and fees as of July 1, according to the American Petroleum Institute. The federal government adds an 18.4-cent tax, which has remained steady since 1993. In addition to New Jersey, six states have increased their gas tax recently: Alabama (two cents), California (3.2 cents), Illinois (0.7 cents), Nebraska (3.9 cents), South Carolina (two cents) and Virginia (five cents).

Tom Kloza, an analyst with the Oil Price Information Service, forecasted more states will raise gas taxes since gasoline demand will likely hover at 85% of usual demand for a while. “We think there will be a ton of them,” Kloza said. “Most of them are going to come after the election, [taking effect] January 1 or July 1 of next year.”

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