Katerina Swanson
The tax on diesel fuel is a topic of interest, especially with the ongoing fluctuations in fuel prices and the impact on consumers and the economy. Diesel fuel taxes are levied by both state and federal governments in the United States, with the federal excise tax set at 24.4 cents per gallon. The state and local taxes vary, resulting in a volume-weighted average fuel tax of 60.29 cents per gallon for diesel as of April 2019. These diesel fuel taxes contribute significantly to government revenues, with motor fuel taxes generating a combined $53 billion in 2021. However, there are ongoing debates about the impact of these taxes on consumption, the environment, and the need for potential increases to fund infrastructure development and maintenance.
| Characteristics | Values |
|---|---|
| Federal excise tax on diesel fuel | 24.4 cents per gallon |
| State and local taxes and fees on diesel fuel | 35.89 cents |
| Total US volume-weighted average fuel tax on diesel fuel | 60.29 cents per gallon |
| Year the federal fuel tax was last raised | 1993 |
| Percentage increase in inflation since 1993 | 68% or up to 77% |
| Amount raised from diesel taxes in Fiscal Year 2016 | $10.3 billion |
| Number of states with a general sales tax or gross receipts tax on motor fuel purchases | 10 |
| States that suspended their gas tax in 2022 | Connecticut, Florida, Georgia, Maryland, and New York |
| States that stopped scheduled gas tax rate increases in 2022 | Illinois and Kentucky |
| States that tie their gas tax rate to inflation or population growth | California, the District of Columbia, Florida, Georgia, Illinois, Michigan, North Carolina, Utah, and Virginia |
Explore related products
What You'll Learn
Federal diesel tax
In the United States, the federal excise tax on diesel fuel is 24.4 cents per gallon. This tax was last raised in October 1993 and has remained unchanged since then, despite inflation increasing by 111% from October 1993 to December 2023. The lack of adjustment for inflation has resulted in a decline in the purchasing power of fixed-rate diesel taxes.
The proceeds from the federal diesel tax are used to support various programs and infrastructure projects. According to Mary Peters, the former Secretary of Transportation, approximately 60% of federal diesel taxes are allocated for highway and bridge construction. The remaining 40% is directed towards earmarked programs, with a portion allocated for mass transit projects.
In Fiscal Year 2016, federal diesel taxes generated $10.3 billion in revenue. However, critics argue that a significant portion of the tax revenue is diverted to unrelated government programs and debt servicing, rather than being solely utilized for transportation infrastructure development and improvement.
To address the loss in purchasing power due to inflation, The National Surface Transportation Infrastructure Financing Commission recommended a 15-cent increase in the diesel tax in February 2009. This proposed increase aimed to offset the decline in real value caused by inflation and ensure sufficient funding for transportation infrastructure projects.
While some states collect sales tax in addition to the federal excise tax, the advertised price of diesel fuel in the United States typically includes all taxes. This practice differs from the pricing of other goods, where taxes are often calculated at the point of purchase.
Red Dyed Fuel: Safe for Diesel Trucks?
You may want to see also
Explore related products
State diesel tax
The United States federal excise tax on diesel fuel is 24.4 cents per gallon. This tax was last raised in 1993 and is not indexed to inflation. On average, as of April 2019, state and local taxes and fees add 35.89 cents to diesel fuel, for a total US volume-weighted average fuel tax of 60.29 cents per gallon for diesel.
State fuel taxes vary across the US and have undergone many revisions since their creation. As of 2016, nineteen states and the District of Columbia have fuel taxes with rates that vary alongside changes in the price of fuel, the inflation rate, vehicle fuel economy, or other factors. Five states charge sales tax on diesel fuel, which is calculated as a percentage of the fuel purchase and varies based on the price of fuel.
The American Petroleum Institute uses a weighted average of local taxes by municipality population to create an average tax for the entire state. Similarly, the national average is weighted by the fuel volume sold in each state. Because many states with the highest taxes also have higher populations, more states (i.e., the less populated ones) have below-average taxes than above-average taxes. Most states exempt diesel fuel from general sales taxes, however, several states collect full or partial sales tax in addition to the excise tax.
Revenues from state diesel fuel taxes are used for various purposes, including maintaining roads and highways, and other environmental purposes that vary from state to state.
The Heavy Cost of Diesel Fuel
You may want to see also
Explore related products
Local diesel tax
In the United States, diesel fuel is subject to various taxes, including federal excise taxes and state and local taxes. These taxes play a crucial role in generating revenue for transportation infrastructure and other government programs.
When it comes to local diesel taxes, the rates can vary depending on the state and municipality. The American Petroleum Institute calculates the average tax for each state by considering the weighted average of local taxes based on municipality population. This means that states with higher populations and tax rates may have a more significant impact on the overall state average.
For instance, in California, the state collects excise taxes from diesel suppliers before the fuel is delivered to retail stations. The revenue from these taxes is deposited into the Motor Vehicle Fuel Account in the Transportation Tax Fund to facilitate refunds as outlined in the Diesel Fuel Tax Law. Any remaining funds are transferred to the Highway Users Tax Account and the State Highway Account. Additionally, local shares are allocated to city and county road funds, contributing to the construction and maintenance of public roads and mass transit systems.
Qualified farming businesses that purchase dyed diesel may be partially exempt from certain taxes, paying a rate of 2.25% plus applicable district taxes. This exemption also applies to sales of dyed diesel for the period from October 1, 2022, to September 30, 2023. However, if dyed diesel is used on highways, it becomes subject to excise taxes.
Diesel Engines: Better Fuel Mileage Than Gas?
You may want to see also
Explore related products
![The Administration of Gasoline Tax Refunds and Exemptions [microform]](https://m.media-amazon.com/images/I/61DrX+VgknL._AC_UY218_.jpg)
Diesel tax revenue
In the United States, the federal excise tax on diesel fuel is 24.4 cents per gallon. On average, as of April 2019, state and local taxes and fees add 35.89 cents to diesel fuel, bringing the total US volume-weighted average fuel tax to 60.29 cents per gallon for diesel.
The US federal diesel tax was last raised on October 1, 1993, and is not indexed to inflation, which increased by 111% from October 1993 until December 2023. This has led to a decline in the purchasing power of fixed-rate diesel taxes. To address this, the National Surface Transportation Infrastructure Financing Commission recommended a 15-cent increase in the diesel tax in a 2009 report. However, critics argue that revenue from diesel taxes is often diverted to government programs unrelated to transportation infrastructure.
State and local governments collected a combined $53 billion in revenue from motor fuel taxes in 2021, with nearly all (97%) coming from state motor fuel taxes. Most states levy per-unit taxes based on the number of gallons purchased, rather than a percentage of the final purchase price. As a result, tax revenue increases only if more fuel is purchased or if lawmakers raise the tax rate.
In 2016, federal fuel taxes raised $10.3 billion from diesel and special motor fuel taxes. About 60% of these funds were used for highway and bridge construction, with the remaining 40% going to earmarked programs, including mass transit projects.
Claiming Diesel Fuel Rebate: A Simple Guide
You may want to see also
Explore related products
Diesel tax rate
The United States federal excise tax on diesel fuel is 24.4 cents per gallon. This figure was last updated on October 1, 1993, and has not been adjusted for inflation, which increased by 111% from October 1993 to December 2023. On average, as of April 2019, state and local taxes and fees added 35.89 cents to diesel fuel, bringing the total US volume-weighted average fuel tax to 60.29 cents per gallon for diesel.
The federal excise tax on diesel fuel is higher than that of gasoline, which is taxed at 18.4 cents per gallon. This discrepancy may be due to the fact that diesel fuel is often used in commercial vehicles and heavy-duty transportation, which can cause more wear and tear on roads and highways. The diesel tax helps fund the maintenance and improvement of transportation infrastructure.
The diesel tax rate varies across different states. While some states have the same tax rates for diesel and gasoline, others have higher rates for diesel. For example, in California, the prepaid general sales tax is included in the state's per-gallon excise tax rate for diesel. In contrast, nine other states levy a separate general sales tax or gross receipts tax on purchases of diesel fuel. Additionally, states like Connecticut, Florida, Georgia, Maryland, and New York temporarily suspended their gas taxes in 2022, which may have impacted the relative tax rates of diesel and gasoline in those states.
The diesel tax rate has been a subject of debate among policymakers and researchers. Some have proposed increasing the diesel tax to encourage a reduction in fuel consumption and decrease America's dependence on foreign oil imports. However, critics argue that revenue from diesel and gasoline taxes is often diverted to unrelated government programs and debt servicing, rather than solely funding transportation infrastructure projects.
It is worth noting that the diesel tax rate in the US has not kept pace with inflation, and the purchasing power of fixed-rate gas taxes has declined over time. This has led to transportation funding gaps in many states, prompting discussions about potential reforms to tie diesel and gasoline tax rates to inflation or other variables such as population growth.
Tops: Your One-Stop Shop for Diesel Fuel
You may want to see also
Frequently asked questions
The federal excise tax on diesel fuel in the US is 24.4 cents per gallon.
In Fiscal Year 2016, federal fuel taxes raised $10.3 billion from diesel and special motor fuel taxes. In 2021, state and local governments collected a combined $53 billion in revenue from motor fuel taxes.
Most states levy per-unit taxes based on the number of gallons of diesel fuel purchased. However, 22 states and the District of Columbia tie their tax rates to variables such as the price of diesel fuel, inflation, or state population growth.
The federal diesel fuel tax was last raised in 1993 and is not indexed to inflation. However, states can adjust their diesel fuel tax rates more frequently. For example, California, the District of Columbia, Florida, Georgia, Illinois, Kentucky, Michigan, North Carolina, Utah, and Virginia have recently made changes to their gas tax rates or suspended them.
![[OLD VERSION] TurboTax Deluxe 2024 Tax Software, Federal & State Tax Return [PC/MAC Download]](https://m.media-amazon.com/images/I/71UbHaUeeUL._AC_UL320_.jpg)
![[OLD VERSION] TurboTax Home & Business 2024 Tax Software, Federal & State Tax Return [PC/MAC Download]](https://m.media-amazon.com/images/I/71b5aAzdXOL._AC_UL320_.jpg)
![(Old Version) H&R Block Tax Software Deluxe + State 2024 with Refund Bonus Offer (Amazon Exclusive) Win/Mac [PC/Mac Online Code]](https://m.media-amazon.com/images/I/51+fonAXhPL._AC_UL320_.jpg)
