Katerina Swanson
Federal excise tax revenues in the United States are collected from the sales of various goods and services, including motor fuel, airline tickets, tobacco, alcohol, and health-related goods and services. Excise taxes are levied on specific goods and services and can be either a per-unit tax or a percentage of the price. In the case of diesel fuel, the federal excise tax is a per-unit tax, currently set at 24.4 cents per gallon. This tax rate has been unchanged since 1993 and is not indexed to inflation, which has led to a decline in the purchasing power of the tax revenue over time. The proceeds from the diesel fuel tax partly support the Highway Trust Fund and other transportation infrastructure projects. Additionally, some tax credits and exemptions are available for certain types of fuel, such as biodiesel and renewable diesel mixtures, which are deemed environmentally superior.
| Characteristics | Values |
|---|---|
| Federal excise tax on diesel fuel | 24.4 cents per gallon ($0.244) |
| Federal excise tax on gasoline | 18.4 cents per gallon ($0.184) |
| State motor vehicle fuel tax | 57.9 cents per gallon ($0.579) |
| State diesel fuel excise tax | 44.1 cents per gallon ($0.441) |
| Sales tax rate for diesel fuel (Oct 1, 2022, to Sept 30, 2023) | 9.0625% plus applicable district taxes |
| Kerosene tax rate for non-commercial aviation | $0.219 per gallon |
| Kerosene tax rate | $0.244 per gallon |
| Excise tax revenue from alcoholic beverages in 2022 | $10.2 billion |
| Excise tax revenue from tobacco in 2022 | $11.3 billion |
| Excise tax revenue from airline tickets in 2022 | $11.4 billion |
| Total excise tax revenue in 2022 | $90 billion |
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What You'll Learn
Federal excise tax on diesel fuel is 24.4 cents per gallon
The federal excise tax on diesel fuel is 24.4 cents per gallon ($0.244). This rate has been unchanged since 1993 and is not indexed to inflation, which had increased by 111% from October 1993 to December 2023.
The federal excise tax on gasoline, on the other hand, is lower at 18.4 cents per gallon. In addition to these federal excise taxes, state and local taxes and fees further increase the total tax burden on motor fuels. As of April 2019, the US volume-weighted average fuel tax was 52.64 cents per gallon for gasoline and 60.29 cents per gallon for diesel, including state and local taxes.
The proceeds from the federal excise tax on diesel fuel partly support the Highway Trust Fund, which is used for transportation infrastructure projects. However, due to the fixed-rate of the tax, the purchasing power of the tax revenue has declined over time due to inflation and improvements in fuel efficiency. Some policy advisors have recommended increasing the diesel tax to fund and sustain the country's transportation infrastructure.
It is worth noting that aviation fuel, such as kerosene, is taxed differently. Kerosene used for non-commercial aviation is taxed at a lower rate of $0.219 per gallon, while the tax rate for commercial aviation is based on passenger airfares, air cargo, and aviation fuel consumption.
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The federal tax was last raised in 1993
The federal tax on diesel fuel was last raised on October 1, 1993, from 14.1 cents to 18.4 cents per gallon, where it remains today. Since 1993, the US federal gasoline tax has been unchanged and not adjusted for inflation. This has resulted in a significant decline in its purchasing power, with the tax being "worth" 45% less in 2021 than it was in 1993. The erosion of the tax's value has had implications for the federal budget and the nation's infrastructure, with rising construction costs and the growing needs of an aging highway system. This has resulted in funding shortfalls for the Highway Trust Fund, which receives around 80% of its revenues from the tax.
The tax proceeds are used to fund and sustain the country's transportation infrastructure, including mass transit. However, with vehicles becoming more fuel-efficient, the purchasing power of fixed-rate gas taxes has decreased over time. This has led to suggestions for increasing the tax rate to generate more revenue for infrastructure development and maintenance.
Some policy advisors and reports have recommended raising the gasoline tax by 10 cents and the diesel tax by 15 cents to address the funding shortfall. However, critics argue that such a plan would disproportionately affect rural Americans who tend to drive longer distances.
The first federal gasoline tax in the United States was created on June 6, 1932, with the enactment of the Revenue Act of 1932, which taxed 1 cent per gallon. In the following years, state fuel taxes were introduced and revised, with Oregon becoming the first state to tax fuel on February 25, 1919.
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State and local taxes add 35.89 cents to diesel
The United States federal excise tax on diesel fuel is 24.4 cents per gallon. This federal 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 first federal gasoline tax in the United States was created on June 6, 1932, with the enactment of the Revenue Act of 1932, which taxed 1 cent per gallon. Oregon was the first US state to tax fuel on February 25, 1919, at a rate of 1 cent per gallon. By 1939, many states levied an average fuel tax of 3.8 cents per gallon.
The American Petroleum Institute calculates the average tax for the entire state by using a weighted average of local taxes based on municipality population. Similarly, the national average is weighted by the fuel volume sold in each state. As a result, more states have below-average taxes than above-average taxes because many states with higher taxes also have larger populations.
Gas taxes are intended to serve as user fees and pollution deterrents, but they vary across states. For example, California has the highest gas tax rate at 68.1 cents per gallon, followed by Illinois at 66.5 cents, and Pennsylvania at 58.7 cents. On the other hand, Alaska has the lowest rate at 8.95 cents, followed by Mississippi at 18.4 cents, and Hawaii at 18.5 cents. These rates do not include the effects of carbon policies, which further increase prices in certain states.
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The first state to tax fuel was Oregon in 1919
The federal excise tax on diesel fuel in the United States is 24.4 cents per gallon. This tax rate also applies to kerosene used in aviation (jet fuel), unless a reduced rate is applied for non-commercial aviation, in which case the tax is 21.9 cents per gallon. Marketers pay 24.4 cents per gallon at the rack, while the user rate is 21.9 cents. The ultimate vendor is the only party that can claim the 2.5 cents per gallon rate, and they must meet specific requirements to do so.
The federal excise tax on gasoline is lower, at 18.4 cents per gallon. This disparity contributes to diesel fuel prices being higher than gasoline prices. Additionally, state and local taxes and fees further impact the total fuel tax rates, which vary across the country. For example, California has the highest gas tax rate at 68.1 cents per gallon, while Alaska has the lowest at 8.95 cents per gallon.
The federal tax on gasoline and diesel fuel was last raised on October 1, 1993, and it has not been adjusted for inflation since then. This has resulted in a significant decline in the purchasing power of the fixed-rate gas taxes. While some policy advisors advocate for an increased tax to fund transportation infrastructure, critics argue that revenue from gas tax increases is often diverted to unrelated government programs.
The first state to tax fuel was Oregon, introducing a 1-cent per gallon tax on February 25, 1919. Within the following decade, all of the then-48 states and the District of Columbia implemented a gasoline tax. By 1939, the average fuel tax across many states had increased to 3.8 cents per gallon. State fuel taxes have continued to undergo revisions over the years, reflecting changing needs and priorities.
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Excise tax revenue from alcoholic beverages in 2022 was $10.2 billion
Federal excise tax revenues in the United States are collected from the sales of various goods and services, including motor fuel, airline tickets, tobacco, alcohol, and health-related goods and services. Excise taxes are consumption taxes levied on specific goods and services, and they can be either per unit or a percentage of the price. In 2022, federal excise tax revenues totalled nearly $90 billion, or 1.8% of total federal tax receipts.
Federal excise taxes are also imposed on tobacco products, with tax rates calculated per thousand cigars or cigarettes or per pound of tobacco. In 2022, tobacco tax revenue totalled $11.3 billion, contributing nearly 13% of all excise tax revenue. The tax on a pack of 20 cigarettes is approximately $1.01. Cigarette papers and tubes are also subject to taxation.
Revenues from excise taxes dedicated to the Airport and Airway Trust Fund amounted to $11.4 billion in 2022, making up 13% of all excise tax receipts. Over 90% of this revenue came from taxing passenger airfares, with the remainder derived from taxes on air cargo and aviation fuels. Aviation fuel taxes include 19.3 cents per gallon on general aviation gasoline, 21.8 cents per gallon on general aviation jet fuel, and 4.3 cents per gallon on commercial jet fuel.
Motor fuel excise taxes, including those on gasoline and diesel, are another significant source of excise tax revenue. The federal excise tax on gasoline is 18.4 cents per gallon, while diesel fuel is taxed at 24.4 cents per gallon. The tax rates for motor fuels have remained unchanged since 1993 and are not indexed to inflation, resulting in a decline in their purchasing power over time.
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Frequently asked questions
The federal excise tax on diesel fuel is currently 24.4 cents per gallon.
Federal excise tax revenues totalled nearly $90 billion in 2022, or 1.8% of total federal tax receipts. Excise tax revenue from alcoholic beverages that year amounted to $10.2 billion, and revenue from tobacco taxes totalled $11.3 billion.
Excise taxes are levied on specific goods, services, and activities. They are collected from producers or wholesalers and embedded in the price paid by final consumers. Aside from diesel fuel, excise taxes are collected from the sales of motor fuel, airline tickets, tobacco, alcohol, and health-related goods and services.
