Nebraska gas tax to decline 4.5 cents a gallon in 2021

Nebraska gas tax to decline 4.5 cents a gallon in 2021

The Nebraska Department of Revenue announced that Nebraska’s gas tax, formally known as the motor fuels tax, will be declining in the new year. The total tax will decrease from 33.2 cents a gallon to 28.7 cents a gallon. The reduction follows a previous hike in the excise, which took effect in July. At the beginning of 2020, the tax was 29.3 cents.

Nebraska’s gas tax is calculated twice a year based on three factors: a fixed rate which is set by the Legislature, a wholesale tax rate that varies based on the price of fuel, and a variable tax rate, which is adjusted to pay for transportation spending budgeted by the Legislature. Most of the receipts go to the Nebraska Department of Transportation, while cities and counties split a share of the remainder.

One reason the tax may have increased during the pandemic is that emergency orders originally gave Nebraskans a grace period for registering their motor vehicles.

With gas prices down, and fewer drivers on the road paying gas tax, motor vehicle sales tax, and state registration fees, the Department of Revenue may have anticipated a higher variable gas tax rate would be necessary to cover their costs. But starting in January 2021, the total gas tax rate will be lower than it was at the beginning of this year.

You might recall the fixed portion of the state gas tax was raised in 2015. It was gradually increased from 10.3 cents a gallon to 16.3 cents, where it remains today. Although that part of the tax has increased by 6 cents, the 2021 wholesale tax rate will also be 6 cents less than in 2015. With an increase in the variable rate since that time, the gas tax for the first half of 2021 will only be about 3 cents higher than it was before the 2015 gas tax increase started its phase-in.

In comparison with state gas taxes in effect in July regionally and nationally, Nebraska’s 28.7 cent gas tax would be middle-of-the-pack, ranking as the 29th lowest state gas tax. Here are the July 2020 tax rates for our neighbors:

Colorado: 22 cents per gallon
Iowa: 30.5 cents per gallon
Kansas: 24.03 cents per gallon
Missouri: 17.42 cents per gallon
South Dakota: 30 cents per gallon
Wyoming: 24 cents per gallon

The state gas tax rate does not include the 18.4 cents federal excise tax that motorists in all of these states also pay at the pump. The next recalculation of the Nebraska gas tax will take place in June 2021, and will be reflected in the price at the pump starting in July.

Photo by sippakorn yamkasikorn on Unsplash

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