Gasoline tax

Gasoline taxes include federal, state, county, and municipal taxes imposed on gasoline motor vehicle fuel. In the United States, most of the federal tax is used to fund maintenance and improvements in such transportation infrastructures as interstate highways. As of mid-2002, the federal excise tax for gasoline stood at 18.4 cents per gallon, and state excise taxes ranged from 7.5 cents in Georgia to 29 cents in Rhode Island (making the weighted national average state tax 19.97 cents per gallon). In total, the U.S. national average gasoline tax (combining federal and state) was 38 cents per gallon.

Oregon became the first state to institute a tax on gasoline in 1919. By the time the federal government established its own 1 cent gas tax in 1932, every state had a gas tax. After several small increases in the 1930s and 1940s, the gas tax was raised to 3 cents to finance the Highway Trust Fund in 1956. The Trust Fund was earmarked to pay for federal interstate construction and other road work. In 1982, the federal gasoline tax was increased to 9 cents to fund road maintenance and mass transit . The tax was hiked again in 1990 to 14.1 cents, and to 18.4 cents in 1993—where it remained as of July 2002.

Over this time, gasoline prices increased from about 20 cents per gallon in 1938 to a U.S. national average of 139.2 cents in May of 2002. The average national gasoline tax (both federal and a weighted average of state taxes) accounts for 30.2% of the retail price of a gallon of gas.

In some countries, diesel fuels are taxed and priced less than gasoline. Commercial vehicles are major consumers of diesel, and lower taxes avoided undue impacts on trucking and commerce. In the United States, diesel is taxed at a higher rate than gasoline—an average of 44 cents per gallon (including 24.3 cents federal tax and the weight average of state taxes). In contrast, gasohol , an alternative fuel consisting of 90% gasoline and 10% ethanol , has a lower rate of taxation (with a 13.1 cent federal excise tax).

Although federal gasoline taxes are a manufacturer's excise tax, meaning that the government collects the tax directly from the manufacturer, rate hikes are often passed on to consumers at the pump. In this light, gasoline taxes have been criticized as regressive and thus inequitable—i.e., lower income individuals pay a greater share of their income as tax than higher income individuals. Also, the tax as a share of the pump price has been increasing. However, it should be noted that the general trend of the real price of gasoline (adjusted for inflation and including taxes) has been declining for many decades. In addition, automobile efficiency (mileage) has been improving and thus the fuel requirements and cost-per-mile-traveled have declined.

These factors can be viewed as largely or completely offsetting the impact of gasoline taxes. For example, Congress attempted in May 1996 to rollback the 4.3 cents tax increase of 1993. The impact of this repeal for a family of four who drive 12,000 miles a year at 20 miles per gallon is a savings of $26, which in the House debates was compared to the cost of a family dinner at McDonald's. On the other hand, a rollback could have bigger consequences for the future upkeep of the country's highways and interstates; a 2000 Congressional report estimated that a repeal of the federal gasoline tax would mean a $5.2 billion annual loss in revenues for the Highway Trust Fund.

Outside of the United States, both gasoline prices and gas tax rates are typically far higher (e.g., gasoline taxes were 307 cents per gallon in the United Kingdom as of March 2002). In addition to funding governments, high gasoline taxes form part of a strategy to encourage the use of public transportation, reduce pollution , conserve energy, and improve national security (since most gasoline is imported).

[Stuart Batterman and Paula Anne Ford-Martin ]

RESOURCES

PERIODICALS

Talley, Louis Allen. Congressional Research Service. "The Federal Excise Tax on Gasoline and the Highway Trust Fund: A Short History" CRS Report for Congress. Washington, DC: Congressional Research Service, March 2000.

OTHER

American Petroleum Institute, Policy Analysis and Statistics Department. How Much We Pay for Gasoline: April 2001 Review. Washington, DC: API, 2001.

U.S. Department of Energy, Energy Information Administration. Gasoline and Diesel Fuel Update. [cited July 9, 2002]. <http://tonto.eia.doe.gov/oog/info/gdu/gasdiesel.asp>.

U.S. Department of Transportation, Federal Highway Administration. Our Nation's Highways: Selected Facts and Figures 2000. Publication No. FHWAPL-01-1012. [cited July 6, 2002]. <http://www.fhwa.dot.gov/ohim/onh00/onh.htm>.