To twist an old saying – everybody complains about gasoline taxes, but nobody does anything about them. But time and more fuel-efficient vehicles have weakened their grasp on our wallets. The decline in tax collections relative to miles driven has also reduced the relative benefit of government funding of highway construction and maintenance, even as our infrastructure is deteriorating.
The current federal gasoline tax is 18.4 cents per gallon. The tax has been at this level since 1993 with a minor decline to 18.3 cents per gallon in 1996-1997. The gasoline tax was introduced in 1932 at 1 cent per gallon with the funds directed to reducing the federal deficit. In 1956 the Federal Highway Trust Fund was established to finance the interstate highway system and other roads; it is the major recipient of federal gasoline taxes.
State gasoline taxes range from 8 cents per gallon in Alaska to 49 cents in California. The chart above includes the average state gasoline tax.
The most significant aspect of this tax is that it is assessed on a gallon. This means that as gasoline prices go up, the tax as a percentage of purchase price declines. For example, in 1960 gasoline cost 31 cents per gallon (US average) and the federal tax was 4 cents. That was 13 percent. Today a gallon of gasoline costs an average of $3.46 and the federal tax is 18.4 cents. That is a federal tax rate of 5.3 percent – quite a decrease!
Our tax rate also goes down as fuel efficiency improves, so you can go a lot further on your gasoline tax than you or your parents could in 1960. If your vehicle uses electricity you are not paying this tax at all.
A few caveats: state gasoline taxes have risen significantly in some states; in California state and federal taxes are about the same percentage of the cost of a gallon of gasoline as they were in the 1960s. Also, the diesel the tax rates are a little higher reflecting the greater mileage from diesel.