Regan Brown
Alabama's fuel tax rates are set to increase once again, marking the second fuel tax increase in four years. The state's gas and diesel tax rates will each increase by a penny, with the gas rate rising to 29 cents per gallon and the diesel rate to 30 cents per gallon. This change is part of the Rebuild Alabama Act, which aims to raise road revenue and improve infrastructure across the state. The Act, signed into law by Governor Kay Ivey in 2019, authorized a 10-cent increase in fuel tax rates over three years, with the initial 6-cent hike taking effect in August 2019. While the fuel tax increase has faced some opposition, supporters argue that it is necessary to fund road and bridge projects and maintain Alabama's transportation infrastructure.
| Characteristics | Values |
|---|---|
| Date of fuel tax increase | 1 October 2023 |
| Previous gas tax rate | 24 cents per gallon |
| New gas tax rate | 29 cents per gallon |
| Previous diesel tax rate | 25 cents per gallon |
| New diesel tax rate | 30 cents per gallon |
| Previous aviation gasoline tax rate | 23.5 cents per gallon |
| New aviation gasoline tax rate | 24.5 cents per gallon |
| Previous jet fuel tax rate | 20.5 cents per gallon |
| New jet fuel tax rate | 21.5 cents per gallon |
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What You'll Learn
Alabama's fuel tax increase in 2019
In 2019, Alabama's fuel tax increased for the first time in 27 years. Governor Kay Ivey signed the Rebuild Alabama Act into law, which authorised tax rates to be increased by 10 cents over three years. The tax hike was to be spread out, with a 6-cent increase starting on 31 August 2019, followed by two 2-cent increases in October 2020 and 2021. The law was expected to raise $323 million annually, with two-thirds of the revenue going to the Alabama Department of Transportation.
The Alabama fuel tax increase was intended to generate funds for road and bridge infrastructure projects. However, some experts suggested that the gas tax was becoming outdated due to the increasing fuel efficiency of vehicles. They proposed a switch to mileage-based fees or road-user fees as a more sustainable funding mechanism for transportation infrastructure.
Despite the conservative Legislature's traditional resistance to tax increases, the Rebuild Alabama Act was passed due to the recognition of the need for additional funding for road and bridge maintenance and improvements. The Act also included a grants program for local highway and bridge work, with $10 million set aside annually for local projects.
While the 2019 fuel tax increase faced some opposition, with only 45% of polled individuals favouring the hike, it was a necessary step towards addressing the state's infrastructure needs. The tax increase demonstrated a commitment to improving Alabama's transportation network and ensuring the safe and efficient movement of people and goods.
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The Rebuild Alabama Act
On March 12, 2019, Governor Kay Ivey signed into law Act 2019-2, also known as the Rebuild Alabama Act. This act imposes an additional excise tax on gasoline and undyed diesel, effective September 1, 2019. The gasoline and undyed diesel excise taxes will increase by $0.06 per gallon, resulting in a total tax of $0.24 per gallon for gasoline and $0.25 per gallon for undyed diesel. This marks the first increase in Alabama's fuel tax since 1992, and it is expected to generate approximately $380 million annually.
While the Act has faced some opposition, with only 45% of polled individuals favoring a fuel tax increase, it is important to note that the gas tax had not been raised in Alabama for 27 years. The increase in fuel tax is a result of the growing number of fuel-efficient vehicles on the roads, which has complicated the funding of infrastructure projects.
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Gas tax increase of 10 cents per gallon
In 2019, Alabama Governor Kay Ivey signed the Rebuild Alabama Act into law, marking the first increase in the state's fuel tax since 1992. The law included a 10-cent increase in the gas tax, to be implemented in increments of 2 or 6 cents over three years. The first increase, a 6-cent hike, took effect on August 31, 2019, raising the gas tax rate from 18 cents to 24 cents per gallon. Two subsequent 2-cent increases took place in October 2020 and October 2021, bringing the gas tax rate to 28 cents per gallon.
The Rebuild Alabama Act was expected to generate an additional $323 million in annual revenue, with two-thirds of the funds going to the Alabama Department of Transportation and the remaining funds distributed to counties and cities for infrastructure improvement, preservation, and maintenance projects. The act also included a grants program, requiring the state to set aside $10 million annually for local highway and bridge work.
While the gas tax increase faced some opposition, with only 45% of polled individuals favoring a fuel tax increase, it was recognized that the gas tax needed to adapt to the increasing fuel efficiency of vehicles. Experts predicted that mileage-based fees would eventually replace the gas tax, but that this shift was likely decades away.
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Excise tax rates for gas and diesel
In Alabama, the state excise tax rates for gasoline and diesel fuel vary. As of October 1, 2021, gasoline is taxed at $0.28 per gallon, while diesel fuel is taxed at $0.29 per gallon. These rates are comprised of multiple levies, with certain portions allocated to specific funds. For instance, a percentage of the gasoline levy is credited to the Water Safety Fund, the Seafood Fund, and the Game and Fish Fund. Additionally, some counties and cities impose their own gasoline and diesel fuel taxes, ranging from $0.005 to $0.09 per gallon.
Historically, Alabama has been reluctant to increase fuel taxes. The state's conservative legislature approved a 10-cent per gallon gas tax increase in 2019, the first hike in 27 years. This increase was to be implemented gradually over three years, with an initial 6-cent rise taking effect on August 31, 2019. The move was expected to generate approximately $380 million annually.
The decision to raise fuel taxes sparked debates about alternative funding mechanisms for road and bridge infrastructure. Experts suggested that mileage-based fees, also known as road-user fees, could eventually replace traditional fuel taxes. However, concerns were raised regarding privacy, technology, and standardization between government levels.
As of 2023, the state excise tax rates for gasoline and diesel fuel in Alabama are $0.29 and $0.30 per gallon, respectively. These rates apply to fuel purchases made within the state and are separate from any federal excise taxes that may also be levied on fuel sales.
In summary, Alabama's excise tax rates for gasoline and diesel fuel have undergone recent changes, with a notable increase in 2019. The state's excise tax rates are subject to periodic adjustments and are influenced by various factors, including infrastructure funding requirements and competing tax models.
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Fuel tax increase funding infrastructure projects
Fuel tax rates in Alabama are set to increase, with the state's gas and diesel tax rates rising by a penny from October 1, 2023. This marks the beginning of another phase of Alabama's 2019 law to increase road revenue, the Rebuild Alabama Act. The Act aims to raise fuel tax rates for the first time in nearly 30 years, with a 10-cent increase per gallon phased in over three years. The initial increase was a 6-cent hike in 2019, followed by two 2-cent increases in the following years. As a result, the current gas rate is 28 cents per gallon, and the diesel rate is 29 cents per gallon.
The Rebuild Alabama Act is expected to generate approximately $323 million annually, with two-thirds of the revenue going to the Alabama Department of Transportation. Counties will collect 25% of the additional funds, while cities will receive 8%. This funding is vital for infrastructure improvement, preservation, and maintenance projects. The Act also includes a grants program, requiring the state to set aside $10 million annually for local highway and bridge work.
While the fuel tax increase provides much-needed funding for infrastructure projects, there are alternative funding mechanisms being considered. Transportation finance experts suggest that a mileage-based fee or road-user fee could be a more sustainable way to fund road and bridge needs in the future. However, privacy concerns and technological challenges must be addressed before implementing such a system.
The gas tax has been a reliable source of funding for transportation infrastructure for many years. However, with the increasing popularity of fuel-efficient vehicles, the gas tax may become less effective over time. As a result, states like Alabama may need to explore alternative funding methods to ensure sufficient revenue for infrastructure projects.
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Frequently asked questions
Fuel tax in Alabama is going up by a penny per gallon for both gas and diesel.
This increase took effect on October 1, 2023.
The last time Alabama increased its fuel tax was in 2019.
There is no set frequency for Alabama fuel tax increases. The 2023 increase was the second in about a year, while the previous increase before 2019 was in 1992.
As of October 1, 2023, the fuel tax rate in Alabama is 29 cents per gallon for gasoline and 30 cents per gallon for diesel.
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