As federal officials expand emergency relief for highway use of dyed diesel, former Nebraska Republican Party Chairman Eric Underwood is proposing a broader approach: an annual state fuel tax holiday for all motorists.
Underwood, now with Advocates for All Nebraskans, said his proposal would suspend Nebraska’s motor fuel tax on gasoline and diesel from Labor Day through Halloween. He described the period as roughly 61 days, covering much of the fall harvest season.
“This has to be done for all Nebraskans, not just one group or the other,” Underwood said in an interview with the Rural Radio Network.
The proposal is separate from the temporary federal effort involving off-road dyed diesel. Underwood said he wants relief that reaches farmers, ranchers and everyday drivers alike.
The U.S. Department of Agriculture said Thursday that 31 states had taken or announced steps to complement President Donald Trump’s emergency dyed diesel initiative. Trump signed his executive order earlier this month while in Grand Island, following Nebraska’s lead as Gov. Jim Pillen was among the first states to take steps to ease the high cost of diesel by suspending taxes. Agriculture Secretary Brooke Rollins praised those governors and urged the remaining states to act.
The IRS issued guidance Oct. 14 suspending enforcement and collection of the applicable federal excise tax and waiving on-road use penalties during the relief period. Additional guidance Oct. 21 eased reporting and recordkeeping requirements for covered transactions.
USDA said the federal diesel excise tax is 24.4 cents per gallon and estimated the broader initiative could produce more than $640 million in combined federal and state savings. That figure is an agency projection, not a tally of realized savings. Some economists have said most diesel used on the farm is already tax free.
Dr. Greg Ibendahl, an agricultural economist at Kansas State University, estimated a typical grain farmer could save about $100 during the order’s three-month window, assuming the deferred federal tax ultimately is not collected.
The new proposal from Underwood proposal would instead establish an annual state tax holiday. He estimated it could provide about 35 cents per gallon in state fuel tax relief, separate from the federal dyed diesel measures.
He said the fall window could help agricultural producers manage fuel costs even when weather changes the timing of harvest.
“Whether you’re a rancher, whether you’re a farmer, whether you’ve got row crops or whatever,” Underwood said, “this 61 day window is going to allow you to reduce the cost of doing business.”
Underwood acknowledged that reducing fuel taxes would create budgeting challenges for government programs supported by that revenue. But he argued households also face pressure to adjust their budgets as taxes rise.
“People need to come first and government second,” he said.
Underwood said he is pursuing the proposal through a petition drive, with the goal of putting it before voters in 2028 and having it take effect in 2029. Those dates are his intended timeline, not an approved implementation schedule.
He said state lawmakers could adopt the policy before then rather than wait for a ballot measure.
“If state senators are unable or unwilling to do policy that impacts all Nebraskans, then the people have the right through petitions to change it,” Underwood said.
