HB 2404
In CommitteeHouse
Special fuels taxes
Reducing taxes on special fuels.
This status may be delayed. See Action History below for the latest updates.
How does a bill become law?
- Introduced: The bill is filed and assigned a number.
- Committee: A subject-matter committee holds hearings, takes public testimony, and decides whether to advance the bill.
- Floor Vote: The full chamber (House or Senate) debates and votes on the bill.
- Opposite Chamber: The bill repeats the committee and floor vote process in the other chamber.
- Governor: The Governor reviews the bill and decides whether to sign or veto it.
- Signed: The bill has been signed into law.
AI Analysis
This bill cancels two planned fuel tax increases on diesel and other special fuels that were set to begin on July 1, 2025, and rolls back the special fuel tax to the 2016 level. It also keeps existing annual tax increases but applies them to the lower base rate, and preserves the alternative-fuel vehicle license fee system.
- Eliminates the 6-cent-per-gallon diesel tax increase that was scheduled to take effect on July 1, 2025.
- Eliminates the 3-cent-per-gallon special fuel tax increase also scheduled for July 1, 2025.
- Reverts the cumulative special fuel tax rate to the level in place on July 1, 2016 (approximately 22.9 cents per gallon) starting on the effective date of this law.
- Maintains the annual 2% fuel tax increases for regular fuel (through 2027) and special fuel (starting in 2028), but only on the reduced base rates.
- Keeps the annual license fee structure for vehicles using natural gas, propane, or compressed natural gas, with fees adjusted using the 2024 fuel tax rate for 2026 only.
Who is affected
- Commercial vehicle operators and freight-dependent businesses — Truckers, farmers, and businesses that rely on diesel or other special fuels for transportation and delivery will pay less in fuel taxes starting in 2026, potentially lowering their operating costs and the price of goods like food.
- Fuel retailers and distributors — Retail fuel stations and distributors in Washington may see increased sales if out-of-state drivers return to buy fuel in-state due to lower prices.
- Users of alternative-fuel vehicles — Drivers of natural gas, propane, or compressed natural gas vehicles will continue to pay an annual license fee instead of per-gallon fuel tax, with the fee adjusted based on current fuel tax rates.
- State and local transportation agencies — State and local governments may collect less revenue from fuel taxes, which could affect transportation funding unless offset by other sources.
Pro/Con Analysis
Stronger case for benefits
Potential Benefits (5)
Eliminating the 6-cent diesel and 3-cent special fuel tax increases in 2025 directly reduces operating costs for commercial trucking, farming, and delivery businesses—many of which are small- or medium-sized—potentially lowering prices for food and goods for consumers.
Business & EmploymentPeopleRef: Sec. 2, subsection (11) and overviewLower fuel prices may reduce out-of-state fuel purchases by Washington residents and businesses, keeping more money in-state and supporting local fuel retailers and associated service jobs—especially in border communities and rural areas.
Business & EmploymentPeopleRef: Overview and Sec. 2, subsection (11)The continuation of the alternative-fuel vehicle license fee system ensures that users of natural gas, propane, and CNG vehicles still contribute to transportation funding—though at a rate tied to the reverted 2024 tax level—providing predictability for those adopting cleaner vehicles.
TransportationPeopleRef: Sec. 3, subsection (2) (2026 license fee adjustment)Reduced transportation costs for goods (especially food and building materials) may ease cost pressures on low- and middle-income households, indirectly supporting housing affordability and household budgets.
HousingPeopleRef: Overview and Sec. 2, subsection (11)By preventing a $0.09-per-gallon increase on diesel and special fuels, the bill helps maintain Washington’s price competitiveness with neighboring states, reducing the risk of cross-border fuel shopping that currently drains local business revenue and jobs.
Business & EmploymentPeopleRef: Overview and Sec. 2, subsection (11)
Potential Concerns (5)
Reduced fuel tax revenue may constrain transportation infrastructure maintenance and expansion, potentially leading to deteriorating road conditions that increase crash risk—especially for heavy commercial vehicles that rely on freight corridors.
Public SafetyPeopleRef: Sec. 2, subsection (11) (reverting special fuel tax to 2016 level) and fiscal impact ($120M reduction)The $120 million annual revenue loss reduces funding for state and local transportation projects, which may delay or cancel road, bridge, and transit improvements that benefit everyday commuters and emergency response access.
Local GovernmentLean peopleRef: Sec. 2, subsection (11) and fiscal impactWhile the bill reduces fuel costs for commercial operators, it does not offset the revenue loss through alternative funding mechanisms, potentially leading to underinvestment in transportation infrastructure that small businesses depend on for supply chain reliability.
Business & EmploymentLean peopleRef: Sec. 2, subsection (12) and fiscal impactThe 2026 license fee for alternative-fuel vehicles is calculated using the 2024 fuel tax rate (before the 2025 increases), which may temporarily underprice the environmental and infrastructure costs of those vehicles relative to their usage, creating an inequity if not corrected in future years.
TransportationRef: Sec. 2, subsection (12) and Sec. 3, subsection (2) (2026 license fee adjustment using 2024 rate)Reduced transportation funding may limit regional transit investments that support affordable housing development near job centers—particularly in high-cost urban areas where housing affordability is already strained.
HousingPeopleRef: Fiscal impact and Sec. 2, subsection (11)
Who Is Most Affected
Commercial trucking firms, farms, and delivery services that rely on diesel see immediate cost savings—especially those with thin margins or operating across state lines. Many are small- or mid-sized businesses.
Fuel retailers in border regions and rural towns benefit from retained customer spending and potential volume gains, though margins may not increase proportionally due to competitive pricing pressures.
Users of alternative-fuel vehicles retain the license-fee alternative but pay slightly less than they would have under the 2025 tax schedule—though the 2026 fee is based on 2024 rates, which may understate true infrastructure cost recovery.
State and local agencies lose $120M annually in projected revenue, potentially delaying road maintenance, bridge repairs, and transit projects—hurting long-term economic resilience and public safety.
Low- and middle-income households benefit from lower food and goods prices due to reduced transport costs, but may face indirect costs if public infrastructure deteriorates or transit options shrink.