Fuel Smarts

Highway Bill Would Equalize Taxes of Alternative Fuels

July 16, 2015

A provision within the House-passed highway and transportation bill, H.R. 3038, would equalize the tax disparity between alternative and conventional fuels.

Currently, LNG and diesel are taxed at the same rate of 24.3 cents per gallon even though LNG produces 58 percent of the energy output of diesel and propane is charged the same 18.3 cents per gallon that gasoline is charged while only producing 72 percent the energy output, according to a release from Rep. Todd Young (R-Ind.).

Under the new provision, federal highway excise taxes on liquefied natural gas and propane autogas will be levied based on the fuels’ energy output instead of their volume and will have their rates changed to 14.1 cents per gallon and 13.2 cents per gallon respectively.

The bill, which passed 312-119, would provide $8 billion in funding to highway and infrastructure expenditures through December 18. Funding would mainly come from applying $3 billion of savings from Transportation Security Administration fees and $5 billion from tax-compliance measures.

Although the bill passed with a majority vote, many Democrats criticized the bill for only being a short term solution where a long term solution is needed.

Rep. Bill Shuster said in a statement that the approval of H.R.3038 will give Chairman Paul Ryan and the Ways and Means Committee time to come up with a long-term transportation bill that is fiscally responsible.

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