Trump signs executive order aimed at curbing price of diesel

President Donald Trump signed an executive order Monday to temporarily allow “dyed” diesel intended for off-road usage to be used on U.S. highways tax-free. The order does so by deferring the federal excise tax in an attempt to lower costs for Americans.

The order directed the secretary of the Treasury and the secretary of defense to defer payment of the federal tax for on-road usage of dyed diesel fuel for the remainder of the year without interest or penalties. It also directed the secretary of agriculture to ensure farmers’ access to dyed diesel in high-demand areas, and to encourage the states to do the same.

How is diesel taxed? Diesel is taxed based on its intended usage. On-road or highway diesel is subject to state and federal excise taxes. Diesel used for off-road purposes, such as agriculture, construction, or heating, is not taxed. Off-road diesel is dyed red so that law enforcement can identify it to enforce penalties and back taxes for on-road usage.

The federal excise tax on highway usage of dyed diesel amounts to about 24.4 cents per gallon, according to the U.S. Energy Information Administration.

The order would defer the federal tax for on-road usage of dyed diesel, allowing vehicles that operate on public highways to use the dyed diesel without penalty. The administration said that the state governors can exercise their enforcement discretion to halt inspections and waive the tax liability that users would face for on-road usage of dyed diesel. The order also said the administration would explore pathways to eliminate the obligation to pay the deferred taxes.

Why this tax cut now? The Trump administration said that farmers and truckers are essential to the American way of life, feeding families, fueling communities, and sustaining the American people. The order was intended to give them relief and would save truckers over $100 per refill, according to the White House.

The Trump administration blamed the Russia-Ukraine war for the current high prices, as well as a lack of refining capacity around the world, and what the administration characterized as Democrat-led States that chose to shut down their refineries in the name of green energy policies.