Gas and Diesel Federal Excise Tax Increases Propose

Sep 10, 2015


Just before Congress went into recess for its summer break, Rep. Tom Rice (R-SC) introduced H.R. 2971 “The Highway Trust Fund Certainty Act,” legislation proposing a $0.101 per gallon increase in the federal excise tax on gasoline and diesel (including the reduced rate for diesel-water fuel emulsion), as well as LNG, CNG and certain alcohol fuels. There is no proposed increased in aviation fuels showing that this legislation is truly intended to target on-road fuels.

The taxes are also made permanent meaning that Congress does not have to reauthorize the rates every few years (currently the gasoline and diesel excise taxes are set to revert to $0.043 per gallon on October 1, 2016). The increased tax rates are proposed to take effect January 1, 2016 and there is proposed a floor stocks tax on previously taxed fuel held in inventory so that it is taxed as if the 2016 tax rates were in effect at the time the tax was imposed.Additionally, the legislation proposes to increase the gasoline and diesel taxes annually – beginning January 1, 2016 – to be adjusted for inflation.

The “Highway Trust Fund Certainty Act” was introduced a few weeks before the Senate approved the “Developing a Reliable and Innovative Vision for the Economy (DRIVE) Act,” a comprehensive package of highway reforms, as an amendment to a bill passed in the House in January to improve treatment of veterans under the Affordable Care Act. The DRIVE Act proposes long term extensions of the gasoline and diesel taxes but does not change the rates. As the House will have to consider the amended version of its legislation as passed in Senate there is a possibility that the House could add its own amendments to not only make the fuel taxes permanent but also increase them. The language of H.R. 2971 could form the basis for such amendments.

It remains to be seen whether the Congressional calendar will allow time for the House to consider the Senate version of the DRIVE Act never mind “The Highway Trust Fund Certainty Act.” Legislative priorities when Congress returns from its summer recess include Iran and tax extenders. However, there is an increasing sense of needing to act comprehensively on highway and transportation funding; with falling oil and gas prices a $0.101 per gallon tax increase could be a quick and easy fix.