Affordability: 6 States Including New Jersey Are Raising Their Gas Tax on July 1st

Fuel Tax Changes Hit Six States on July 1st: What Drivers Need to Know

the staff of the Ridgewood blog

Trenton NJ, American drivers might be enjoying a brief moment of relief at the pump, but a looming regulatory shift is about to change the math for millions of motorists. Starting July 1, 2026, six states—California, Illinois, New Jersey, Michigan, Maryland, and Mississippi—will implement fuel tax hikes or automatic inflation adjustments.

These state-level policy shifts arrive just as the summer driving season peaks and global energy markets remain highly volatile. Here is everything you need to know about the upcoming fuel tax changes, how they impact your wallet, and why gas prices are defying broader market trends.

The Macro View: Falling Crude vs. Rising Sticky Inflation

The timing of these state tax hikes creates a strange paradox for consumers. On one hand, global oil markets have recently cooled. Following announcements from the White House regarding potential diplomatic de-escalation in the Middle East and the potential reopening of the crucial Strait of Hormuz, crude oil took a sharp dive.

Brent Crude: Slipped below $90 per barrel, trading around $88–$89.
WTI (West Texas Intermediate): Fell to roughly $85–$87 per barrel.

This market drop triggered a highly welcomed reprieve for motorists, dragging national average retail gasoline prices down to $4.15 per gallon from $4.52 just a month prior.

The Inflation Catch: Despite this temporary relief, energy remains the primary driver of stubborn economic inflation. U.S. consumer prices ticked up 4.2% annually in May—marking a three-year high. Shockingly, volatile energy costs accounted for roughly 60% of that monthly increase in the Consumer Price Index (CPI).

As GasBuddy’s head of petroleum analysis, Patrick De Haan, warns: “The future of prices remains murky… global oil supplies continue to tighten, and any further deterioration in the situation could send prices sharply higher.”

State-by-State Breakdown: The July 1 Fuel Tax Adjustments

As the country prepares for the U.S. Semiquincentennial (America 250) on Independence Day, drivers in the following six states will see structural changes to their local fuel costs:

State	Current Average Gas Price (Per Gallon)	Key July 1st Tax Change / Status	Total Combined Estimated Pump Tax
California	$5.83	Excise tax rises from $0.612 to $0.634	Over $0.70 / gallon
Illinois	$4.48	Scheduled CPI hike paused; local county taxes shifting	Over $0.85 / gallon
New Jersey	$4.20	Variable PPGRT adjusted to meet TTF targets	Approx. $0.633 / gallon
Michigan	$4.28	Restructured to flat 52.4¢ excise tax	Flat 52.4¢ + Federal
Maryland	$3.93	Motor fuel tax ticks up to 46.6¢	Indexed to CPI
Mississippi	$3.72	Phase 2 of a 9¢ hike; rising by 3¢	Multi-year increase

1. California

California’s annual July 1 inflation adjustment under Senate Bill 1 (SB 1) remains firmly on track. The state’s gasoline excise tax climbs from $0.612 to $0.634 per gallon, while the diesel rate hits $0.48 per gallon. When paired with federal taxes and environmental surcharges, total pump fees easily exceed 70 cents, keeping California’s gas the most expensive in the nation.

2. Illinois

In a rare move, Illinois lawmakers suspended a scheduled 1.3-cent inflation-linked hike for six months, holding the baseline motor fuel tax at 48.3 cents per gallon. However, don’t celebrate too quickly: regional changes are still hurting wallets. For example, Kane County recently increased its local motor fuel tax from 5 cents to 8 cents per gallon, keeping Illinois among the heaviest-taxed fueling markets in the U.S.

3. New Jersey

New Jersey relies on its variable Petroleum Products Gross Receipts Tax (PPGRT) to fund its Transportation Trust Fund (TTF), which requires a legally mandated $2.1 billion annually for infrastructure. Because overall fuel consumption volume has fluctuated, the state periodically recalculates this rate to ensure stable revenue, keeping Garden State drivers at a combined state/federal tax burden of roughly 63.3 cents.

4. Michigan

Michigan recently underwent a massive system overhaul, completely eliminating its variable 6% sales tax on fuel and replacing it with a predictable, flat motor fuel excise tax of 52.4 cents per gallon. While the state calls this reform “revenue-neutral,” experts note drivers will experience a minor net increase of 1 to 2 cents depending on baseline market fluctuations. Crucially, 100% of these funds are now legally locked into road construction.

5. Maryland

Per a 2013 legislative formula, Maryland automatically ties its fuel taxes to the Consumer Price Index. A 2.8% annual inflation metric means that on July 1, Maryland’s motor fuel tax inches up by six-tenths of a cent to 46.6 cents per gallon for regular unleaded gasoline.

6. Mississippi

Though Mississippi boasts some of the cheapest gas in the nation at $3.72 per gallon, it is currently in the middle of a major multi-year infrastructure overhaul. The state is phasing in a total 9-cent-per-gallon increase via 3-cent annual increments. July 1 marks the next step away from its historic 18-cent flat rate (which sat untouched since 1987), moving toward a modern funding structure targeting over $200 million in fresh roadway funding.

The Federal Debate: Will a Gas Tax Holiday Happen?

The steady march of state-level tax increases has reignited a fierce political debate over a federal gas tax holiday.

Proponents of the holiday argue that temporarily eliminating the 18.4-cent federal gasoline tax and 24.4-cent diesel tax would offer vital relief to families squeezed by broader inflation. However, data from economic think tanks suggests the actual impact on consumer wallets might be underwhelming:

Modest Savings: A Tax Foundation analysis reveals that a federal suspension would only save average drivers roughly $6 to $11 per month.
Massive Infrastructure Deficits: A brief three-month federal tax holiday starting in July would drain an estimated $9 billion from the Highway Trust Fund, resulting in a net federal budgetary hit of $6.6 billion. A six-month suspension could cost upwards of $13 billion.

Final Thoughts for Drivers

While federal lawmakers debate relief packages in Washington, state capital policies are moving in the opposite direction to protect local infrastructure budgets. If you reside in one of these six changing states, budgeting a bit extra for summer road trips is a smart financial move.

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1 thought on “Affordability: 6 States Including New Jersey Are Raising Their Gas Tax on July 1st”

Anonymous
June 14, 2026

Nj tax is NOT for infrastructure. It’s used to subsidize the bloated NJ Transit bureaucracy.
The electric vehicles are heavier than gas powered cars and increase wear on the roads and get away with a smalll extra registration fee, currently $270 goring up by$10 annually with a maximum of $290.. this bullshit should stop and charge them $1000 per year.

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