The U.S. federal government funds infrastructure projects through the highway trust fund. This trust fund receives revenue from mainly the excise tax on gasoline, and uses the revenue to pay for transportation projects through grants to state and local governments.
The taxes and spending associated with the highway trust fund are based on the benefit principle of taxation, which states that what one pays to the government should be connected to the benefits one receives.
Currently, the federal government levies a $0.184 per gallon taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. on gasoline. In addition, state and local governments levy an average gas tax per gallon of about $0.35. This is an average combined rate of about $0.53 a gallon.
The U.S. combined gas taxA gas tax is commonly used to describe the variety of taxes levied on gasoline at both the federal and state levels, to provide funds for highway repair and maintenance, as well as for other government infrastructure projects. These taxes are levied in a few ways, including per-gallon excise taxes, excise taxes imposed on wholesalers, and general sales taxes that apply to the purchase of gasoline. rate is actually a lot lower than rates in other industrialized countries. According to data from the OECD, the average gas tax rate among the 34 advanced economies is $2.62 per gallon. In fact, the U.S.’s gas tax is the second lowest (Mexico is the only country without a gas tax) and has a rate less than half of that of the next highest country, Canada, which has a rate of $1.25 per gallon.
On top of excise taxes, all OECD countries levy their value added tax (VAT) on gasoline consumption. In the United States, only a few states (Hawaii, Illinois, Indiana, and Michigan) levy an additional sales tax on gasoline purchases. This means that the difference between taxes paid on gasoline in the United States and other OECD countries is even larger than the data on just excise taxes implies.
Without data on what the gas tax revenue is used for across the OECD, it’s hard to make a direct comparison between the U.S. and other countries. For instance, Turkey, which has the highest gasoline excise taxAn excise tax is a tax imposed on a specific good or activity. Excise taxes are commonly levied on cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, amusement activities, and betting, and typically make up a relatively small and volatile portion of state and local and, to a lesser extent, federal tax collections. in the OECD ($4.32 a gallon), may only use a small fraction of the revenue for roads. The rest may be used for other government spending. If this is the case, their gas tax doesn’t conform to the benefit principle as strictly as it does in the United States. In other words, their gas tax is high not because they spend more on roads, but because they chose to tax gas more.
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OECD Gas Excise Tax Rates (Per Gallon), 2013 |
|
|
Country |
Tax Per Gallon |
|
Australia |
$1.40 |
|
Austria |
$2.46 |
|
Belgium |
$3.10 |
|
Canada |
$1.25 |
|
Chile |
$1.93 |
|
Czech Republic |
$2.50 |
|
Denmark |
$2.95 |
|
Estonia |
$2.12 |
|
Finland |
$3.26 |
|
France |
$3.07 |
|
Germany |
$3.29 |
|
Greece |
$3.37 |
|
Hungary |
$2.08 |
|
Iceland |
$1.97 |
|
Ireland |
$2.95 |
|
Israel |
$4.20 |
|
Italy |
$3.67 |
|
Japan |
$2.16 |
|
Korea |
$2.69 |
|
Luxembourg |
$2.31 |
|
Mexico |
$0.00 |
|
Netherlands |
$3.79 |
|
New Zealand |
$2.01 |
|
Norway |
$3.67 |
|
Poland |
$2.01 |
|
Portugal |
$2.95 |
|
Slovakia |
$2.57 |
|
Slovenia |
$2.76 |
|
Spain |
$2.35 |
|
Sweden |
$3.10 |
|
Switzerland |
$2.99 |
|
Turkey |
$4.32 |
|
United Kingdom |
$3.44 |
|
United States |
$0.53 |
|
Average OECD |
$2.62 |