Regan Brown
The federal fuel tax in the United States has remained unchanged since 1993 and is currently levied at 18.4 cents per gallon for gasoline and 24.4 cents per gallon for diesel fuel. This tax is included in the advertised price of fuel and is used to fund transportation infrastructure, including highway and bridge construction, as well as other earmarked programs. With rising infrastructure costs and more fuel-efficient vehicles, there have been calls for an increase in the federal fuel tax to sustain transportation infrastructure development.
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What You'll Learn
Federal fuel tax rates
The federal fuel tax was last raised on October 1, 1993, and has not been adjusted for inflation, which increased by 111% from October 1993 to December 2023. The purchasing power of the fixed-rate gas tax has declined over time, and some policy advisors believe an increase is necessary to fund and sustain the country's transportation infrastructure. However, critics argue that much of the revenue from an increased tax would be diverted to government programs and debt servicing unrelated to transportation infrastructure.
In addition to federal fuel taxes, all states and the District of Columbia also impose taxes on motor fuels. These vary widely, with per-gallon gas tax rates ranging from 8.95 cents in Alaska to 62.9 cents in California. California has the highest gas tax rate, followed by Illinois and Pennsylvania. In 2022, Connecticut, Florida, Georgia, Maryland, and New York temporarily suspended their gas taxes.
Excise taxes are commonly levied on specific goods or activities, such as cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, amusement activities, and betting. They typically make up a relatively small and volatile portion of state and local tax collections and, to a lesser extent, federal tax collections.
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State fuel tax rates
The United States federal excise tax on gasoline is 18.4 cents per gallon and 24.4 cents per gallon for diesel fuel. Kerosene for aviation use (jet fuel) is taxed at $0.244 per gallon, unless a reduced rate of $0.219 applies. The US federal gasoline tax has remained unchanged since 1993 and is not adjusted for inflation.
Some northeastern states, including Massachusetts, New York, and the participating states in the Regional Greenhouse Gas Initiative, have implemented cap-and-invest programs that are expected to drive up gas prices.
Many states do not index their tax rates to inflation, which has led to a decline in the purchasing power of fixed-rate gas taxes. To address this, some policy advisors have recommended increasing the gas tax and tying it to inflation. However, critics argue that much of the revenue from gas taxes is diverted to government programs and debt servicing unrelated to transportation infrastructure.
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Aviation fuel tax
In the United States, the 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 has not been adjusted for inflation, which increased by 111% from October 1993 until December 2023.
The aviation industry has largely escaped the tax burden, with no tax being paid on plane fuel. However, environmental campaigners argue that aviation fuel tax is necessary as flying is the most carbon-intensive form of transport. An aviation fuel tax could also raise huge amounts of revenue that could be put towards decarbonizing the economy.
In the US, kerosene, which is used to power aircraft, is taxed at $0.244 per gallon unless a reduced rate applies. For kerosene removed directly from an on-airport terminal (ramp) directly into the fuel tank of an aircraft for use in non-commercial aviation, the tax rate is $0.219. The rate of $0.219 also applies if kerosene is transported directly into any aircraft from a qualified refueler truck, tanker, or tank wagon. These taxes fund airport and Air Traffic Control operations by the Federal Aviation Administration (FAA).
General aviation has contributed to the Airport/Airways Trust Fund through a "fuel tax". Aircraft users pay federal taxes "at the pump", with general aviation paying 21.9 cents per gallon on jet fuel and 19.4 cents per gallon on aviation gasoline. Fuel taxes are an efficient way to collect taxes as they are directly remitted to the federal government, eliminating the need for a large bureaucracy to collect taxes from pilots and aircraft owners. Fuel taxes are also easy to pay and difficult to avoid. They provide a stable, predictable source of revenue to the FAA and are assigned fairly based on an operator's use of the system.
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How fuel tax is calculated
The federal fuel tax in the United States has remained unchanged since 1993. It is not indexed to inflation, which increased by 111% from October 1993 to December 2023. The federal excise tax on gasoline is 18.4 cents per gallon, while diesel fuel is taxed at 24.4 cents per gallon. Kerosene used in aviation (jet fuel) is taxed at $0.244 per gallon, with a reduced rate of $0.219 for non-commercial aviation.
The American Petroleum Institute calculates the average state tax by weighing local taxes by municipality population. The national average, on the other hand, is weighted by the fuel volume sold in each state. As a result, most states with higher populations have higher taxes, and more states have below-average taxes.
Excise taxes are a type of levy imposed on specific goods or activities, such as cigarettes, alcoholic beverages, gasoline, and insurance premiums. In the context of fuel taxes, excise taxes can be levied per gallon purchased at the pump or on wholesalers, who typically pass the cost on to consumers.
In addition to federal excise taxes, state taxes on fuel include excise, environmental, special, and inspection fees. These taxes vary across states and are used to fund highway repair, maintenance, and other government infrastructure projects. Some states also collect sales tax in addition to the excise tax, further increasing the cost of fuel for consumers.
While fuel taxes are intended to generate revenue for transportation infrastructure, critics argue that the funds are often diverted to unrelated government programs and debt servicing. Additionally, as vehicles become more fuel-efficient, the purchasing power of fixed-rate gas taxes declines over time due to inflation. To address this issue, the National Surface Transportation Infrastructure Financing Commission recommended increasing gasoline and diesel taxes and tying these rates to inflation.
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History of federal fuel tax
The US federal government has been taxing fuel for over 80 years. The first federal gasoline tax was created on June 6, 1932, with the enactment of the Revenue Act of 1932, which taxed 1 cent per gallon. This was a temporary measure aimed at deficit reduction during the Great Depression and was scheduled to expire in 1934. However, the National Industrial Recovery Act of 1933 extended the tax and increased it to 1.5 cents. The Revenue Act of 1941 made the gas tax permanent and maintained it at 1.5 cents per gallon.
After World War II, opposition to the federal gas tax emerged from auto, oil, and travel interests, as well as from the states, which argued that the gas tax should be under their jurisdiction. Despite this opposition, the federal government continued to collect the gas tax. In 1956, the Federal Highway Act raised the tax to 3 cents per gallon to fund the newly established Highway Trust Fund.
Over time, Congress increased the federal gas tax multiple times. During the Korean War, it was raised to 2 cents per gallon. Subsequent increases brought the tax to 9 cents per gallon, with 1 cent dedicated to mass transit projects. With further adjustments, the tax rose to 14 cents per gallon. The addition of a 0.1-cent-per-gallon levy to fund the leaking underground storage tank trust fund brought the federal tax to its current rate of 18.4 cents per gallon for gasoline and 24.4 cents per gallon for diesel fuel.
The federal tax on gasoline was last raised on October 1, 1993, and has not been adjusted for inflation, which increased by about 111% from October 1993 until December 2023. Experts argue that the purchasing power of the fixed-rate gas tax has declined due to increasing construction costs and the improved fuel efficiency of vehicles. As a result, some policy advisors advocate for a higher tax to sustain the country's transportation infrastructure.
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Frequently asked questions
The federal fuel tax in the US is 18.4 cents per gallon for gasoline and 24.4 cents per gallon for diesel fuel.
The federal fuel tax rate was last raised on October 1, 1993, and has remained unchanged since.
The federal fuel tax is a per-unit tax, meaning consumers pay based on the number of gallons purchased rather than a percentage of the final purchase price.
About 60% of federal fuel taxes are used for highway and bridge construction, with the remaining 40% going to earmarked programs, including a minority for mass transit projects.
No, the federal fuel tax rate is the same across all states. However, states levy additional taxes on fuel, which vary by state.
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