Happy Birthday to the Federal Gasoline Tax

June 6, 2013

7 in 10 Americans say that the high price of gasoline causes financial hardship for their family. The painful routine of filling up the gas tank is often all too familiar for many Americans. It is becoming more apparent as prices top $4 a gallon that the pain at the pump will only get worse. As the reality of climbing gas prices sinks in, we pause to recognize the birthday of the federal gasoline tax.

The gasoline tax was first signed into law 81 years ago today by President Herbert Hoover on June 6, 1932. It was designed to combat growing budget deficits. The economic turmoil brought on by the Great Depression had sharply reduced federal revenue while spending on relief and public works programs dramatically increased. The 72nd Congress examined many options for revenue-generation and ultimately passed legislation creating a federal gasoline excise tax at a rate of 1 cent per gallon (the equivalent of about 17 cents per gallon today).

The gas tax has significantly changed over the past 81 years. One year after its creation the IRS reported that it generated $125 million tax dollars, nearly 8 percent of all federal revenue. Since then, the gasoline tax has increased ten times (most recently in 1993) to its current rate of 18.4 cents per gallon. Federal gasoline and diesel taxes generate about $30 billion per year.

Some have called for an increase in the gas tax both to curb the deficit and to deter people from using gasoline for environmental reasons. The impact of any increase in the gas tax will be directly passed to the consumers at the pump. The average burden of federal gasoline taxes is already $150 per licensed driver. Will Americans support paying more than that? Research conducted by the Pew Research Center answers that question with a resounding no. Pew conducted a survey where they questioned people regarding twelve different options for deficit reduction. Gasoline tax increases, a national sales tax, a tax on employer-provided health insurance, and the elimination of the home mortgage interest deduction were several of the options mentioned. The proposal to raise the gasoline tax garnered the highest disapproval rating at 74 percent. Only 22 percent of people surveyed support raising the federal gasoline tax.

How much the gasoline tax affects the price of gasoline is debatable, but one thing is for certain: the birthday of the gas tax is one thing many Americans wished never happened.

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