June 1, 1993

The Price of Mobility: Gasoline Taxes in America

Download Special Report No. 22

Special Report No. 22

Executive Summary
In 1992, the federal government raised $15 billion from the 14.1-cent per gallon federal gasoline tax. Most of this revenue flows into the federal Highway Trust Fund and is sent back to the states in the form of federal aid for highways.

States themselves raised $20 billion from gasoline excise taxes in 1992. State gas tax rates currently range from 7.5-cents per gallon in Georgia to 26-cents per gallon in Rhode Island. The current average combined federal plus state tax rate is 32.9-cents per gallon.

On average, each American paid $142 per year in federal and state gasoline excise taxes in 1992. This translates into a per-driver burden of $212 annually. In addition, state general sales taxes and other state and local charges increase the price of gas at the pump.

Higher federal gasoline taxes may be coming down the road as Washington considers its tax increase options. Proposals for a motor fuels tax hike may boost gasoline prices 4.3-cents per gallon at the pump—a 31 percent hike in the federal excise on gasoline.

A 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.

A 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.

A sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding.