Many people are beginning to wrap their minds around the House Republicans’ proposed destination-based cash-flow tax and what it means for tax reform. Most people are still looking into the tax’s impacts on trade and how...
- The Tax Policy Blog
- State Inflation-Indexing of Gasoline Taxes
State Inflation-Indexing of Gasoline Taxes
We've been asked which states adjust their gasoline tax for inflation. Most states (and the federal government) define their gas tax in so many cents per gallon, which can make a difference as time passes and inflation erodes the purchasing power of that tax rate. For example, the federal motor fuels tax today generates one-third fewer dollars in real terms since 1993, when it was last increased. Inflation-adjusting your gasoline tax can prevent this, although it also means you're writing automatic tax increases into law.
- 3 states adjust their gasoline tax for inflation based on the Consumer Price Index: Florida, Maryland (effective 1/1/13), and New Hampshire (effective 7/1/14). Massachusetts will begin doing so on 1/1/15, assuming it is not repealed by voters in November. Maine formerly adjusted for CPI but repealed that effective 1/1/12.
- 4 additional states and DC adjust some portion of their gasoline tax for the wholesale price of gasoline: Kentucky, North Carolina, Virginia, West Virginia, and the District of Columbia.
- 1 additional state adjusts the gasoline tax for state transportation revenue needs: Nebraska.
Additionally, some states collect their sales tax in whole or in part on gasoline purchases: Hawaii, Illinois, Indiana, and Michigan. California applies a partial "sales tax" on gasoline on the wholesale price. New York collects local sales taxes on gasoline.
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About the Tax Policy Blog
The Tax Policy Blog is the official blog of the Tax Foundation, a non-partisan, non-profit research organization that has monitored tax policy at the federal, state and local levels since 1937. Our economists welcome your feedback. If you would like to send an e-mail to the author of a blog post, please click on that person's name to locate his or her e-mail address or visit our staff page here.