Ameer Randolph
Texans pay a significant amount in fuel taxes, which are an important source of revenue for the state and federal governments. In fiscal 2015, Texas motor fuel taxes generated $3.4 billion, making them the fourth-largest source of state tax revenue. Texans pay 38.4 cents in taxes for every gallon of gasoline and 44.4 cents per gallon for diesel when considering total levies, including federal taxes. These rates are lower than those in other large states, such as Pennsylvania, which had higher fuel tax rates in 2015. Texas's fuel taxes are used to fund transportation projects, such as building and maintaining state highways, roads, and bridges. While there has been no proposal to suspend Texas's fuel excise tax, rising inflation is impacting infrastructure projects, and any changes to fuel taxes could have long-term consequences.
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What You'll Learn
Texans pay 38.4 cents in taxes for every gallon of gasoline
The state's gasoline tax was last raised in 1991 and has not kept pace with inflation. As a result, the purchasing power of the tax has decreased over time. In contrast, transportation costs have increased significantly, with the cost of building roads and bridges rising by 83.4% between fiscal years 2003 and 2013. Despite this, Texas motor fuel taxes generated more than $3.4 billion in fiscal 2015, making them the fourth-largest source of state tax revenue.
Motor fuel taxes are an important source of revenue for the federal and state governments. In Texas, the majority of this revenue is used for transportation projects, such as building and maintaining state highways, roads, and bridges. However, rising inflation is slowing down or postponing infrastructure projects, and suspending fuel taxes to provide relief to drivers could exacerbate these delays.
While Texas has relatively low fuel taxes compared to other large states, the impact of these taxes is unevenly distributed across the population. Texans who live in rural areas or have long commutes may feel the burden of fuel taxes more heavily than those who live in urban areas or have shorter commutes. Additionally, individuals with lower incomes may struggle to afford the combined cost of fuel and taxes, particularly during periods of high inflation or economic downturn.
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Diesel fuel is taxed at 44.4 cents per gallon
Texans pay a total of 44.4 cents in taxes for every gallon of diesel fuel they buy. This includes the federal excise tax of 24.4 cents per gallon, plus state and local taxes and fees that add, on average, an additional 20.4 cents. Texas' diesel taxes are the lowest among the 10 largest states; for comparison, Pennsylvanians paid almost twice as much in 2015, at 89.7 cents per gallon.
Texas' motor fuel taxes are a significant source of revenue for the state, generating over $3.4 billion in fiscal 2015, with diesel alone accounting for $860.9 million. This revenue is crucial for funding transportation projects, such as building and maintaining state highways, roads, and bridges. However, due to inflation, the purchasing power of the state's fuel taxes has decreased over time. For example, the Texas gasoline tax, set at 20 cents per gallon in 1991, had a purchasing power of only 6.8 cents by 2014.
While most fuel taxes were initially levied as a fixed amount per gallon, some states have now introduced variable rates that change with the price of fuel, inflation, vehicle fuel economy, or other factors. Texas is not one of these states, as its fuel tax rates have remained static in recent years. Nevertheless, Texans' high fuel usage means that the state still generates substantial revenue from fuel taxes, contributing significantly to its tax revenue.
The high fuel tax revenue is partly due to Texans' high fuel consumption, with the state ranking as one of the top fuel-consuming entities globally. In 2012, Texas ranked among the top eight nations in gasoline and diesel usage, ahead of many countries. This high consumption results in a considerable tax revenue stream, which is essential for maintaining and improving Texas' transportation infrastructure.
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Texas' fuel taxes fund infrastructure projects
Texans pay fuel taxes that contribute to funding infrastructure projects. Motor fuel is an indispensable product that is a significant source of revenue for the federal and state governments. Texans use approximately 13 billion gallons of gasoline and 4.5 billion gallons of diesel fuel annually, in addition to smaller amounts of alternative fuels like liquefied and compressed natural gas. In fiscal 2015, Texas' motor fuel taxes generated over $3.4 billion, making them the fourth-largest source of state tax revenue. Texans pay 38.4 cents in taxes for every gallon of gasoline and 44.4 cents per gallon for diesel when considering total levies, including federal taxes. These fuel taxes are crucial for funding transportation projects, such as building and maintaining highways, roads, and bridges.
The Texas A&M Transportation Institute's (TTI) 2016 publication, Gas Tax Facts, highlights the impact of inflation on the purchasing power of fuel taxes. The state's gasoline tax, set at 20 cents per gallon in 1991, had declined to 6.8 cents by 2014 due to inflation. Meanwhile, transportation costs have skyrocketed, with the cost of constructing roads and bridges increasing by 83.4% from fiscal 2003 to 2013. This has led to delays or postponements of infrastructure projects.
To address the challenges posed by inflation, some states have implemented dynamic fuel tax rates that adjust according to changes in the price of fuel, inflation rates, or other factors. As of 2016, nineteen states, including the District of Columbia, had adopted such flexible fuel tax rates. However, Texas has not proposed suspending its fuel excise tax, as it plays a vital role in generating revenue for essential infrastructure developments and maintenance.
The federal government also imposes a 0.1-cent fee per gallon of motor fuel to address leaking underground storage tanks. While Texas' fuel taxes are among the lowest compared to other large states, the revenue they generate is crucial for the state's transportation infrastructure. Nearly all states, Texas included, allocate the majority of this revenue to transportation projects, ensuring the continued improvement and upkeep of their road networks.
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Texans use 13 billion gallons of gasoline annually
Texas is a large state, and its residents use a lot of fuel to get around. Texans consume about 13 billion gallons of gasoline and 4.5 billion gallons of diesel fuel annually, as well as smaller amounts of alternative fuels like compressed and liquefied natural gas. In 2012, only eight nations used more gasoline and diesel than Texas. This high fuel consumption translates to significant revenue for the state through fuel taxes.
Texas's motor fuel taxes generated over $3.4 billion in fiscal 2015, making them the fourth-largest source of state tax revenue. Texans pay 38.4 cents in taxes for every gallon of gasoline and 44.4 cents per gallon for diesel when federal taxes are included. This is significantly lower than what residents of other large states like Pennsylvania pay. For example, in 2015, Pennsylvanians paid about twice as much in fuel taxes, with rates of 70 cents per gallon for gasoline and 89.7 cents per gallon for diesel.
The bulk of Texas's fuel tax revenue is used for transportation projects, including building and maintaining public roadways, which is crucial in such a large state. After refunds and collection costs, three-quarters of the state's motor fuel tax revenue is allocated for this purpose. The remaining quarter goes to the state's Available School Fund, supporting public education.
While fuel taxes are a significant source of revenue for Texas, their share of total tax collections has declined over time. This decline is partly due to inflation, which has reduced the purchasing power of the fuel tax. For example, the Texas A&M Transportation Institute reported that the actual purchasing power of the state's gasoline tax, set at 20 cents per gallon in 1991, had fallen to 6.8 cents by 2014 due to inflation. During the same period, transportation costs increased much faster than the general inflation rate, impacting the state's ability to fund infrastructure projects.
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Texas' fuel tax is not indexed to inflation
Texans pay 38.4 cents in taxes for every gallon of gasoline they buy and 44.4 cents per gallon for diesel. This is already lower than the national average, but when federal taxes are taken into account, the state's gasoline and diesel taxes are the lowest among the 10 largest states.
While Texas has not proposed suspending its fuel excise tax, Texans could expect to pay less for fuel if this were to happen. However, this could have a long-term cost. Taxes on fuel are used to fund infrastructure projects, such as roads, bridges, and overpasses. In 2015, the Texas A&M Transportation Institute (TTI) reported to a Texas legislative committee that the actual purchasing power of the state's gasoline tax, set at 20 cents per gallon in 1991, had fallen to 6.8 cents by 2014 due to inflation. This meant that the cost of building roads and bridges increased by 83.4% from 2003 to 2013, while the state's motor fuel tax revenue rose by only 13.5%.
As a result of this disparity, motor fuel taxes will only be able to support a decreasing amount of road and bridge construction and maintenance, even as the demand for transportation infrastructure increases. To address this issue, Texas voters have approved measures to supplement road funding by drawing revenues from oil and gas production taxes, the general sales tax, and the sales tax on motor fuels. However, these methods are not without risk, and voter disapproval is a potential concern.
In conclusion, while Texans already pay relatively low fuel taxes compared to other large states, the impact of inflation on the purchasing power of these taxes has been significant. This has led to a funding shortfall for transportation infrastructure projects, which the state has attempted to address through various measures. However, these solutions may not be sufficient to keep up with the rising costs of construction and the increasing demand for transportation infrastructure.
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Frequently asked questions
Texans pay 38.4 cents in taxes for every gallon of gasoline and 44.4 cents per gallon for diesel.
The fuel tax is used to "build and maintain state highways, roads and bridges".
In fiscal 2015, Texas made over $3.4 billion from fuel taxes, making it the fourth-largest source of state tax revenue.
Texans pay less in fuel taxes compared to most other large states. For example, in 2015, Pennsylvanians paid roughly twice as much as Texans, at 70 cents and 89.7 cents per gallon for gasoline and diesel, respectively.
Texas's fuel tax is currently a fixed number of cents per gallon. However, some states vary their fuel tax rates according to changes in the price of fuel, inflation rate, vehicle fuel economy, or other factors.
