State Gasoline Tax Rates in 2016

March 3, 2016

Nicole Kaeding

Nicole Kaeding

States continue to grapple with the effects of falling fuel prices. Resource-heavy states, like Alaska, are particularly hard-hit. Even states that do not produce gasoline are being affected. The lower fuel costs are bringing in less gas tax revenue in some states, causing budget deficits.

State gas taxes vary widely. The highest state gas tax is assessed in Pennsylvania, at 50.4 cents per gallon, with Washington State (44.5 cpg) and New York (42.64 cpg) following closely behind. Alaska drivers pay the lowest rate in the country at 12.25 cents per gallon. These figures do not include the 18.4 cpg federal gas tax.

This week’s map shows the gas tax rate in each state as of January 1, 2016.

Gas taxes operate under the benefit principle. In general, gas taxes are used to provide revenue for road construction, maintenance, repair, and improvements, but states are moving away from this approach. In fiscal year 2013, the last year in which data is available, gas taxes and motor vehicle license fees paid for 41.4 percent of state and local road spending. That percentage is falling over time as state gas rates do not keep up with inflation.

States assess gas taxes in a variety of ways. Some states assess a flat, per-gallon tax rate that is collected at the pump. Other states charge wholesalers a tax on the wholesale price of a gallon, and some states assess a sales tax on the purchase of gasoline. This makes it difficult to directly compare gasoline tax rates across state lines, but the American Petroleum Institute’s data attempts to do just that. Their methodology corrects for this variance and calculates the average tax rate on a gallon of fuel in each state.

For more information on gas taxes, click here.

Follow Nicole on Twitter.

Topics

Related Articles

Compare Tobacco Tax Data in Your State

Tackling America’s Debt and Deficit Crisis Requires Social Security and Medicare Reform

Testimony: The Role of Corporate Taxation in the European Union’s Future Tax Policy Mix

Tax Burden on Labor in Europe

How Stable is Cigarette Tax Revenue?

The U.S. Tax Burden on Labor Remains below the OECD Average

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.

Inflation is when the general price of goods and services increases across the economy, reducing the purchasing power of a currency and the value of certain assets. The same paycheck covers less goods, services, and bills. It is sometimes referred to as a “hidden tax,” as it leaves taxpayers less well-off due to higher costs and “bracket creep,” while increasing the government’s spending power.

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.

The average tax rate is the total tax paid divided by taxable income. While marginal tax rates show the amount of tax paid on the next dollar earned, average tax rates show the overall share of income paid in taxes.