Mercedes Mullins
Federal excise taxes are levied on specific goods and services, including motor fuel, airline tickets, tobacco, alcohol, and health-related goods and services. In 2022, federal excise tax revenues totalled nearly $90 billion, or 1.8% of total federal tax receipts. Motor fuel taxes are a significant contributor to these revenues, with gasoline and diesel taxes of 18.4 and 24.4 cents per gallon, respectively, making up over 85% of total highway tax revenue. The last increase in federal fuel taxes was in 1993, and since then, the purchasing power of these fixed-rate taxes has declined due to inflation. This has led to calls for an increase in fuel taxes to fund transportation infrastructure and reduce America's dependence on foreign oil.
| Characteristics | Values |
|---|---|
| Federal excise tax rate on gasoline fuel | 18.4 cents per gallon |
| Federal excise tax rate on diesel fuel | 24.4 cents per gallon |
| Federal excise tax rate on aviation gasoline | 19.4 cents per gallon |
| Federal excise tax rate on aviation gasoline (fractional ownership program aircraft) | $0.141 per gallon |
| Federal excise tax rate on kerosene used in aviation (Jet fuel) | $0.244 per gallon |
| Federal excise tax rate on kerosene for non-commercial aviation | $0.219 per gallon |
| Federal excise tax revenue from alcoholic beverages in 2022 | $10.2 billion |
| Federal excise tax revenue from tobacco products in 2022 | $11.3 billion |
| Federal excise tax revenue from highway-related taxes in 2022 | $41.5 billion |
| Federal excise tax revenue from all sources in 2022 | $90 billion |
| Federal excise tax revenue from gasoline in Fiscal Year 2016 | $26.1 billion |
| First federal gasoline tax rate in the US | 1 cent per gallon |
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What You'll Learn
Federal excise tax rates vary by state
Federal excise tax rates vary across states in the US. The federal excise tax on gasoline fuel is 18.4 cents per gallon, and it has remained unchanged since 1993. However, states also have their own excise tax rates on top of the federal tax. These state excise taxes can include various fees, such as environmental taxes, special taxes, and inspection fees.
The first federal gasoline tax in the US was enacted on June 6, 1932, with a rate of 1 cent per gallon. Over time, this rate has increased, but it has been stagnant since 1993. The last time the federal tax was raised was on October 1, 1993, and it is not indexed to inflation. As a result, the purchasing power of the fixed-rate gas tax has declined over the years.
In addition to federal excise taxes, state and local taxes add to the overall tax burden on gasoline fuel. As of April 2019, state and local taxes added an average of 34.24 cents to gasoline fuel, resulting in a total US volume-weighted average fuel tax of 52.64 cents per gallon for gasoline.
The revenue generated from these taxes is used for various purposes. For example, proceeds from the federal excise tax on gasoline partly support the Highway Trust Fund, while revenues from aviation fuel and jet fuel taxes primarily fund airport and Air Traffic Control operations by the Federal Aviation Administration (FAA). Additionally, some states use the revenue from gasoline and diesel taxes for transportation-related programs, such as improving infrastructure.
It is worth noting that the first state to tax fuel was Oregon, on February 25, 1919, with a tax rate of 1 cent per gallon. In the following decade, all US states introduced a gasoline tax, and by 1939, many states levied an average fuel tax of 3.8 cents per gallon.
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Gas tax funds infrastructure
The US federal excise tax on gasoline is currently 18.4 cents per gallon, and it has been unchanged since 1993. The tax revenue generated from gasoline sales is used to fund transportation infrastructure, including mass transit. For example, proceeds from the tax support the Highway Trust Fund, which received $41.5 billion in highway-related excise tax revenue in 2022, accounting for 47% of all excise tax revenue. Additionally, some jurisdictions use the revenue specifically for transportation-related programs like improving infrastructure.
While the federal gasoline tax rate has remained static, inflation has significantly impacted the purchasing power of these tax revenues over time. Between 1993 and 2023, inflation increased by 111%, causing a decline in the real value of the fixed-rate gas taxes. To address this issue, the National Surface Transportation Infrastructure Financing Commission recommended a 10-cent increase in the gasoline excise tax in a 2009 report.
In addition to federal gasoline excise taxes, state and local taxes and fees further contribute to funding infrastructure. As of April 2019, these additional taxes and fees averaged 34.24 cents per gallon for gasoline, resulting in a total US volume-weighted average fuel tax of 52.64 cents per gallon.
It is worth noting that not all states apply the same tax rates. The American Petroleum Institute calculates a weighted average of local taxes by municipality population to determine the average tax for each state. Consequently, states with higher populations tend to have higher taxes, while less populated states often have below-average taxes. Additionally, some states collect sales tax on top of the excise tax, while others exempt gasoline from general sales taxes.
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Gas tax rates haven't changed since 1993
The United States federal excise tax on gasoline has remained unchanged since 1993, at 18.4 cents per gallon (4.86 cents per litre). This rate was last raised on October 1, 1993, and has not been adjusted for inflation, which increased by 111% from October 1993 to December 2023. As a result, the purchasing power of the fixed-rate gas tax has declined over time.
The first federal gasoline tax in the United States was introduced on June 6, 1932, with the enactment of the Revenue Act of 1932, which taxed 1 cent per gallon (0.3 cents per litre). This tax was not dedicated to building roads but to deficit reduction during the Great Depression. Over time, the tax rate was increased, with Congress adding surcharges to fund specific initiatives, such as the leaking underground storage tank trust fund. By 1993, the federal gasoline tax had reached its current rate of 18.4 cents per gallon.
Since 1993, there have been discussions and proposals to increase the federal gasoline tax to account for inflation and the growing need for infrastructure funding. The National Surface Transportation Infrastructure Financing Commission, for example, recommended a 10-cent increase in the gasoline tax in 2009. However, critics of gas tax increases argue that revenue is often diverted to government programs unrelated to transportation. Additionally, they note that increased fuel costs may lead to reduced consumption and a potential decrease in America's dependence on foreign oil.
While the federal gasoline tax rate has remained static, state fuel taxes have undergone revisions. As of April 2019, state and local taxes added an average of 34.24 cents to gasoline and 35.89 cents to diesel, resulting in a total US volume-weighted average fuel tax of 52.64 cents per gallon for gasoline and 60.29 cents per gallon for diesel.
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Excise taxes are levied on specific goods
Excise duties or taxes serve both political and financial ends. They are often imposed to promote public safety and health, public morals, environmental protection, and national defense. For example, excise duties have been introduced on certain forms of transport that are considered polluting, such as air transport, and on the consumption of products that generate polluting waste that is not recycled or is harmful to the environment, such as electronic products and certain plastic packaging. Excise taxes can also be used to fund projects related to the taxed product or service, such as highway and airport improvements.
In the United States, federal excise taxes are usually imposed on the sale of goods and services such as fuel, airline tickets, heavy trucks and highway tractors, indoor tanning, tires, and tobacco. The United States federal excise tax on gasoline is 18.4 cents per gallon and 24.4 cents per gallon for diesel fuel. Federal fuel taxes raised $36.4 billion in Fiscal Year 2016, with $26.1 billion coming from gasoline taxes. The tax has not been raised since 1993 and is not indexed to inflation.
The Inflation Reduction Act of 2022 created a new 1% excise tax on the repurchase of corporate stock by certain publicly traded corporations or their specified affiliates. It also made permanent higher tax rates under section 4121 of the Internal Revenue Code, which funds the Black Lung Disability Trust Fund. Additionally, the Act extended several excise fuel incentive credits through December 31, 2024, and reinstated the excise taxes on certain chemicals and chemical substances with modifications, effective July 1, 2022.
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Excise tax rates vary by type of fuel
The United States federal excise tax on gasoline is 18.4 cents per gallon and 24.4 cents per gallon for diesel fuel. The federal tax was last raised on October 1, 1993, and hasn't changed since. It is not indexed to inflation, which increased by 111% from October 1993 to December 2023.
State excise tax rates for gasoline also vary across the US. In 2019, revenues from the transportation fund were over $44 billion. Depending on the jurisdiction, some of the revenue from gasoline and diesel taxes can only be used for transportation-related programs like improving infrastructure. Other jurisdictions allow the revenues to be added to the general fund, which is used for a variety of programs.
Some states have explored environmental taxes or carbon taxes, which would also impact the price of gas at the pump. These are designed to shape behavior, discouraging the consumption of products or services that generate emissions, like gasoline.
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Frequently asked questions
The federal excise tax on gasoline fuel is 18.4 cents per gallon.
Federal excise tax revenues totalled nearly $90 billion in 2022, or 1.8% of total federal tax receipts.
Federal fuel taxes raised $26.1 billion from gasoline taxes in 2016.
The federal excise tax on gasoline fuel was last raised on October 1, 1993, and it is not indexed to inflation.
Federal excise taxes are levied on motor fuel, airline tickets, tobacco, alcohol, and health-related goods and services.
