Introduction
All 50 states, Washington, D.C., and the federal government levy some form of a gasoline tax. Most commonly, these taxes are structured as a fixed cent-per-gallon rate. However, 24 states and Washington, D.C., have a variable-rate gas tax that adjusts, to some degree, with inflation or prices without regular legislative action. According to the Institute on Taxation and Economic Policy (ITEP), these states account for a majority of the nation’s population.
The federal gas tax of 18.4 cents per gallon (CPG) has not been increased since 1993 and at least eight states have gone longer than that since raising their own gas tax.
In many states, gas tax revenues are not keeping up with the transportation funding needs of the state. The weaknesses of a per-gallon gas tax are well understood—as vehicles become more efficient, they require less gasoline per mile. At the same time, younger generations are driving less than previous ones. States are also feeling a pinch from rising costs for transportation projects. The Congressional Budget Office reports that even as nominal spending on infrastructure has risen 44% since 2003, real spending is down 9%.
Recent Action
Since 2013, 31 states and Washington, D.C., have enacted legislation to increase their state gas taxes. Many of these states recognized the potential issues with a fixed-rate tax and have used a range of approaches to create what many transportation experts hope will be a more sustainable revenue source. Included in these approaches are a variety of variable-rate gas tax structures.
Forms of Variable-Rate Taxes
Examples of variable-rate gas taxes used by states include:
- A percentage tax on either the wholesale or “rack” price of gasoline—the price at which refineries sell their gas to clients. Proponents argue that this structure will allow for increased tax revenues as inflation causes gas prices to increase. Conversely, states will also experience decreased revenues as gas prices drop, and the volatile price of oil can create problems for long-term revenue forecasting.
- In 2015, Kentucky and North Carolina adjusted their percentage-based gas taxes in response to dramatic decreases in revenues due to falling gas prices.
- Statutory provisions to automatically adjust a CPG tax to the consumer price index (CPI) (Florida, Maryland, North Carolina and Rhode Island).
- Tying the gas tax to a state’s inflation (California and Michigan). For example, in California, beginning July 1, 2020, the gas tax is adjusted according to the state CPI. The first increase was based on the CPI increase from Nov. 1, 2017, to Nov. 1, 2019, and subsequent adjustments will occur annually and be added to the associated rate for that year. The amount of the increase is the percentage equal to the increase in the California CPI, which is calculated by the state Department of Finance and rounded to the nearest one-tenth of 1 cent (1 CPG).
- Linking the gas tax to other metrics, such as population (North Carolina) or appropriation decisions (Nebraska).
- In 2020, Virginia expanded its wholesale fuel tax to apply statewide and also changed the formula from a percentage basis to a fixed CPG rate adjusted to annual changes in the CPI.
- Hawaii, Illinois and Indiana apply the state’s general sales tax to gasoline and therefore revenues are affected by prices.
- In 2015, Georgia became the first state to enact legislation linking its gas tax to the efficiency standards of motor vehicles, potentially alleviating any lost revenue because of more fuel-efficient cars.
- Nevada's gas tax is not indexed statewide, but the gas taxes in Clark and Washoe counties are indexed. The Nevada Legislature allowed voters by county to decide on whether to index their gas taxes, with Clark and Washoe counties being the only ones to choose to index.
The chart below lists the tax structure and year of the last legislatively imposed increase for 23 states and Washington, D.C., with current variable-rate gas taxes.
FAQs
Examples of variable-rate gas taxes used by states include: A percentage tax on either the wholesale or “rack” price of gasoline—the price at which refineries sell their gas to clients. Proponents argue that this structure will allow for increased tax revenues as inflation causes gas prices to increase.
How much is the government tax on each gallon of gasoline? ›
The United States federal excise tax on gasoline is 18.4 cents per gallon and 24.4 cents per gallon for diesel fuel. Proceeds from the tax partly support the Highway Trust Fund. The federal tax was last raised on October 1, 1993, and is not indexed to inflation, which increased 111% from Oct.
Is New Jersey raising gas taxes? ›
New Jersey is raising gas taxes and a new electric vehicle fee to pay for road repairs, infrastructure. Starting in July, drivers in New Jersey will see an annual increase in the tax on gasoline — estimated at around 2 cents per gallon. Electric vehicle owners will see an annual road maintenance fee.
How much is the New York state gas tax? ›
New York gas tax is $0.2535 per gallon, investing in urban mass transit systems, particularly in the New York City area, to complement its road networks.
What is the gas tax in Ohio? ›
Ohio's tax of 38.5 cents per gallon of gasoline and 47 cents per gallon of diesel fuel is the main way the state pays for road construction and maintenance. Between July 2021 and June 2022, drivers paid more than $2.6 billion in gas and diesel taxes, according to ODOT.
Who has the highest tax per gallon of gas? ›
California has the highest tax rate on gasoline in the United States. As of July 2023, the gas tax in California amounted to 77.9 U.S. cents per gallon. California has long been known as the state with the highest tax rates – and consequently some of the highest fuel prices in the country.
When a tax of $1.00 per gallon is imposed on sellers of gasoline? ›
When a tax of $ 1 . 0 0 per gallon is imposed on sellers of gasoline, the supply curve for gasoline shifts upward, but by less than $ 1 .
How much tax is on a gallon of gas in NJ? ›
Prior to those changes, New Jersey's gas tax was the second lowest in the country. Today, New Jersey's 42.3-cent-per-gallon tax on gasoline and its 49.3-cent tax on diesel are among the nation's highest.
Why does NJ pump their own gas? ›
In the original bill, the New Jersey state legislature cited safety concerns and rising costs to consumers as reasons to not transition over to self-service. But every time there's a spike in gas prices, bills opposing full service start to pop up.
How many states have raised their gas tax? ›
Since 2013, 33 states and the District of Columbia have enacted legislation to increase gas taxes. In 2024, New Jersey altered its state gas tax formula to gradually increase the tax for fiscal years 2025-2029.
How much do I pay? Our state gas tax is 20¢ per gallon. The average driver pays $9.52 a month in state fuel taxes.
What state has the highest taxes? ›
In fact, the states with the highest tax in the U.S. in 2021 are: California (13.3%) Hawaii (11%) New Jersey (10.75%)
What is Pennsylvania's gas tax? ›
The Pennsylvania Department of Transportation said the tax on gasoline will fall to 57.6 cents per gallon, a decrease of 3.5 cents, and the tax on diesel will fall to 74.1 cents per gallon, a reduction of 4.4 cents. The tax is applied to wholesalers and is coupled with a federal gas tax of 18.4 cents per gallon.
How much is Michigan gas tax? ›
(WXYZ) — Michigan drivers will be paying more at the pump in 2023 because the Michigan gas tax has gone up. A law signed under former Michigan Governor Rick Snyder increased Michigan's gas tax from 27.2 cents a gallon to 28.6 cents. The rate increase is either 5% each year or the rate of inflation.
What is the gas tax in Illinois? ›
Those inflationary adjustments took it from 38 cents in 2019 to the current 45.4 cents. Illinois Department of Revenue calculations set the new tax at 47 cents starting July 1. That means the average driver will be paying about $184 a year more in state gas taxes than when Pritzker took office.
What is the gas tax in California? ›
Come July 1, the state excise tax will rise to 60 cents a gallon. According to CalTrans, the excise tax pays for 80% of highway and road repairs. On average, Californians pay roughly $300 a year in state gas taxes.
How much government revenue does the gasoline tax generate? ›
How much revenue do state and local governments raise from motor fuel taxes? State and local governments collected a combined $53 billion in revenue from motor fuel taxes in 2021, or 1.3 percent of general revenue.
How much do oil companies make per gallon? ›
Over the six months of data released by the CEC, the average net refiner profit margin is 5 cents per gallon.
What is the IRS excise tax on motor fuel? ›
18.4 cents per gallon. This excise tax gener- ates over $20 billion per year in tax revenue. Revenues are currently 170 times the amount gener- ated in 1933, the first year of the Federal gasoline excise tax.
What state has the highest gas prices? ›
