Katerina Swanson
Fuel tax rates vary widely across the United States, with state and local taxes and fees adding an average of 34.24 cents to gasoline and 35.89 cents to diesel, on top of the federal excise tax of 18.4 cents per gallon for gasoline and 24.4 cents per gallon for diesel fuel. California has the highest tax rate on gasoline at $0.596 per gallon, while Alaska has the lowest at $0.0895 per gallon. Fuel taxes are intended to serve as user fees and pollution deterrents, but critics argue that revenue is often diverted to unrelated government programs. With the rise of electric vehicles and improvements in fuel efficiency, the effectiveness of fuel taxes as user fees for road use is diminishing, and many states are considering alternative tax models.
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What You'll Learn
Gasoline tax rates by state
Gas taxes are levied at both the federal and state levels in the United States, and they vary widely across states. The federal excise tax on gasoline is 18.4 cents per gallon, and it has remained unchanged since 1993. On top of this, state and local taxes and fees add, on average, 34.24 cents to gasoline, for a total US volume-weighted average fuel tax of 52.64 cents per gallon for gasoline.
However, these numbers can be very different depending on the state. For example, California has the highest gas tax rate at 68.1 cents per gallon, followed by Illinois (66.5 cents per gallon) and Pennsylvania (58.7 cents per gallon). On the other hand, Alaska has the lowest tax rate on gasoline at 8.95 cents per gallon, followed by Mississippi (18.4 cents per gallon) and Hawaii (18.5 cents per gallon). Some states also collect full or partial sales tax in addition to the excise tax, and some states have fuel taxes with rates that vary alongside changes in the price of fuel, the inflation rate, vehicle fuel economy, or other factors. For example, in Connecticut, drivers pay up to 26.4 cents per gallon in wholesale tax, which is in addition to a simple 25-cent excise tax on each gallon of gas. In many cases, gas taxes are adjusted annually based on the consumer price index, a proxy for inflation calculated by the US Bureau of Labor Statistics.
Gas taxes are intended to serve as user fees and pollution deterrents, providing funds for highway repair and maintenance, as well as for other government infrastructure projects. However, with the increasing prominence of electric vehicles and general improvements in vehicle fuel efficiency, the effectiveness of gas taxes as user fees for road use is diminishing. Additionally, the purchasing power of fixed-rate gas taxes has declined due to rising infrastructure construction costs and increasing fuel efficiency. To address this, the National Surface Transportation Infrastructure Financing Commission recommended a 10-cent increase in the gasoline tax and a reform tying the tax rate 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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Diesel tax rates by state
Diesel tax rates vary across different states in the USA. The federal excise tax on diesel fuel is 24.4 cents per gallon, which includes an additional $0.001/gal from the Leaking Underground Storage Tank (LUST) Fund. On average, as of April 2019, state and local taxes and fees add 35.89 cents to diesel, for a total US volume-weighted average fuel tax of 60.29 cents per gallon for diesel.
The three states with the highest diesel taxes as of 2024 are California ($0.9212/gal), Pennsylvania ($0.7410/gal), and Illinois ($0.7360/gal or $0.7460/gal). These states also have the highest gasoline taxes. The lowest diesel tax rate is in Alaska ($0.0895/gal), followed by Mississippi ($0.1840/gal) and Hawaii ($0.1850/gal).
Diesel tax rates have changed in several states since July 2024. Diesel fuel taxes decreased in four states, with Michigan seeing the largest decrease of $0.036. Meanwhile, diesel taxes increased in nine states, with Connecticut having the largest increase of $0.032 to $0.524/gal.
The diesel tax rates by state vary due to factors such as inflation, vehicle fuel efficiency, and the need to fund transportation infrastructure. Some states have considered replacing their gas taxes with vehicle miles traveled (VMT) taxes, using actual miles driven as the metric for the user fee instead of gas consumed.
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Jet fuel tax rates by state
The tax rate on jet fuel varies across states in the US. In Colorado, the excise tax on jet fuel is 4 cents per gallon for commercial operations, while the federal excise tax is 19.4 cents per gallon for non-commercial operations. Additionally, a 2.9% state sales tax is collected on the retail cost of jet fuel. Colorado's Division of Aeronautics and Colorado Aeronautical Board are funded by a portion of the tax revenue collected from aviation fuel sales.
Massachusetts has the highest excise tax on aviation fuel at a rate of 38 cents per gallon, while the District of Columbia has the highest tax rate on jet fuel specifically, at 23.5 cents per gallon. On the other end of the spectrum, Oklahoma has the lowest tax rate on jet fuel, at just 0.0008 cents per gallon.
The tax rates on jet fuel can be applied differently depending on the state. Some states include jet fuel in their sales tax base, while others levy a separate excise tax, and in some states, both apply. Forty states impose an excise tax on aviation fuels. The tax rates can also vary based on the type of operation, with some states exempting commercial airlines from paying aviation fuel excise taxes.
The jet fuel tax rates also differ based on the method of refueling. For instance, the tax rate for kerosene, which is commonly used as jet fuel, is generally $0.244 per gallon. However, if the kerosene is obtained directly from an on-airport terminal or a qualified refueler truck, the tax rate decreases to $0.219 per gallon. These taxes are crucial for funding airport operations and Air Traffic Control operations by the Federal Aviation Administration (FAA).
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Aviation fuel tax rates by state
Aviation fuel tax rates vary across different states in the US. Aviation fuel is generally taxed at $0.244 per gallon, but a reduced rate of $0.219 is applied if the fuel is loaded directly into the aircraft from a qualified refueler truck, tanker, or tank wagon on an airport terminal ramp. This rate also applies when the fuel is removed directly from an on-airport terminal (ramp) into the fuel tank of an aircraft for non-commercial aviation.
Forty states impose an excise tax on aviation fuels. Massachusetts imposes the highest excise tax on aviation fuel at a rate of 38 cents per gallon, while Oklahoma has the lowest tax rate on aviation fuel at 0.0008 cents per gallon. Some states include jet fuel in their sales tax base, while others assess an excise tax separately, and in some states, both apply. The federal excise tax for non-commercial operations is 19.4 cents per gallon on aviation gasoline and 21.9 cents per gallon on jet fuel. For commercial operations, the federal excise tax rate for jet fuel is 4.4 cents per gallon.
The proceeds from aviation fuel taxes are primarily used to fund airport and Air Traffic Control operations by the Federal Aviation Administration (FAA). Additionally, state taxes on aviation fuel can be utilized for state aviation programs and airport revenue, including capital and operating costs.
It is worth noting that commercial airlines are often exempt from paying aviation fuel excise taxes, and the advertised price of fuel in the US typically includes all taxes.
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Gas tax increases in certain states
Gas taxes affect the lives and finances of most Americans. Gas taxes are intended to serve as user fees and pollution deterrents, but they vary widely across states. The unchanged tax rate from 1993 provides less real money than it did initially, when adjusted for inflation. This has resulted in a decline in the purchasing power of fixed-rate gas taxes.
To offset this loss in purchasing power, The National Surface Transportation Infrastructure Financing Commission recommended a 10-cent increase in the gasoline tax and a 15-cent increase in the diesel tax in 2009. Critics of gas tax increases argue that much of the revenue is diverted to government programs unrelated to transportation infrastructure. However, researchers have noted that these diversions occur in both directions, and gas taxes do not cover the full cost of road-related spending.
California has the highest tax rate on gasoline, at $0.596 per gallon, followed by Pennsylvania at $0.576. California also has the largest additional burden on gas prices due to carbon taxes, with an estimated 12 cents passed through from the Low Carbon Fuel Standard. The impact of environmental programs on gas prices is difficult to determine, as there are varying estimates from different sources.
Alaska has the lowest tax rate on gasoline, at $0.0895 per gallon.
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Frequently asked questions
A fuel tax is a tax levied on the consumption of gasoline, diesel, and other fuels. These taxes are meant to serve as user fees and pollution deterrents, and they vary across different states.
There are three main types of fuel taxes: per-gallon excise taxes, excise taxes imposed on wholesalers, and general sales taxes that apply to the purchase of gasoline.
The federal tax on gasoline is 18.4 cents per gallon, and it has remained unchanged since 1993.
California has the highest fuel tax on gasoline at 68.1 cents per gallon, followed closely by Illinois and Pennsylvania.
Alaska has the lowest fuel tax on gasoline at 8.95 cents per gallon, followed by Mississippi and Hawaii.
