WASHINGTON — New legislation in the works by U.S. Rep. Kevin Kiley, R-Calif., would impose a federal ceiling on state-level fuel taxes in a move that could dismantle one of trucking’s biggest operating expenses.
Under Kiley’s “Gas Tax Reduction Act,” any state that maintains a fuel tax exceeding 50 cents per gallon would face an immediate 8% reduction in funding from the National Highway Performance Program and the Surface Transportation Block Grant Program – funding mechanisms that help maintain critical freight corridors, and address specific trucking industry needs such as improved truck parking.
It’s an attempt to use federal highway funding as leverage to force state-level fiscal responsibility.
“Californians pay the highest gas taxes in America, and they get little to show for it,” Kiley said in a recent press statement. “This bill sends a clear message: states that overtax their citizens to compensate for inefficient spending should not expect unlimited federal support. If Sacramento wants Washington’s help, it should stop punishing drivers.”
The legislation – which has yet to be formally introduced – is aimed predominantly at passenger cars. However, because fuel is a major operational expense for truck drivers and trucking companies, the bill would represent a potential sea change in regional profit margins.
In California alone, the bill would immediately slash the state fuel tax burden by roughly 21 cents per gallon. Other states with combined diesel tax rates (including excise taxes and other state fees) that exceed 50 center per gallon include Pennsylvania, Illinois, New Jersey, and Michigan.
In addition, because trucking companies often use the International Fuel Tax Agreement to reconcile taxes across states, a national cap could simplify cost projection for interstate routes by narrowing the gap between low-tax states and high-tax corridors.
Proponents of measures such as Kiley’s argue that high-tax states overtax citizens to compensate for inefficient spending. Kiley contends that federal transportation dollars should not be used to subsidize taxation policies that drive up the cost of living for families and small businesses.
Opponents argue that these state taxes are vital for funding road safety, bridge repairs, and air pollution reduction efforts, warning that an 8% cut to federal transportation funding would lead to more potholes and longer commutes.
For truckers, poor road maintenance is considered to be its own hidden tax because it leads to increased wear and tear on tires and suspension systems.
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