Gas taxes are excise charges levied when you fill up your car with gasoline. The federal government and all 50 states levy gas taxes, with the majority of the money earned going toward highway repairs and other infrastructure projects.
State gas taxes vary from little under 9 cents per gallon in Alaska to nearly 78 cents per gallon in California, with some jurisdictions charging based on the amount spent rather than the volume of fuel consumed.
U.S. states have levied gas taxes since the early days of automobile travel. In 1919, a little over a decade after Henry Ford’s Model T made owning a car affordable for the masses, Oregon became the first state to adopt a gas tax—at 1 cent per gallon.
Within 10 years, every state was collecting gas taxes. The federal government followed suit in 1932, establishing a nationwide gas tax of 1 cent per gallon in an attempt to shrink a budget deficit rising as a result of the Great Depression.
The basic concept behind the tax is the benefits received rule: The notion that people should be taxed based on how much they benefit from government spending. Thus, drivers pay a gas tax to help cover the cost of building and maintaining roads, bridges, and tunnels—and to address the problems of traffic congestion and pollution.
Current Problems
Unfortunately, the revenue raised from gas taxes has failed to keep up with rising infrastructure costs and inflation. The development of electric vehicles and increased fuel efficiency of all autos have reduced gas demand relative to vehicle miles traveled, further widening the gap between the gas tax funds raised and road maintenance costs.
While the federal gas tax has been stuck at 18.4 cents a gallon since 1993, the increasing squeeze on transportation budgets has led many states to raise the gas tax in recent years. Thirty-three states have done so since 2013.
More states are also changing how their motor fuel excise taxes work to try to keep up with rising gas prices and inflation. Nearly half of the states now have variable-rate gas taxes, using formulas linked to everything from the price of gas and the Consumer Price Index (CPI) to fuel efficiency and population growth. For example, Indiana links its gas tax rate to the rates of inflation and personal income growth.
Most states assess a variety of taxes and fees on top of the gas tax, including environmental, underground storage, and inspection fees. Other types of fuel are taxed as well, including diesel, ethanol, aviation fuel, and alternatives including natural gas.
How Much Are State Gas Taxes?
When you add up all the taxes and fees, the average state gas tax stood at 32.26 cents per gallon on July 1, 2023, according to the U.S. Energy Information Administration. Throw in the 18.4 cents federal tax, and the total gas tax rises to 50 cents per gallon.
Read Also: How Long do You Have to Pay Sales Tax?
Gas taxes thus accounted, on average, for about 15% of the average retail gasoline price of $3.50 per gallon of regular unleaded as of November 2023.
Here’s a rundown of the gas taxes in each state, including other taxes and fees, as of July 2023:
| Gas Taxes by State and the District of Columbia | |||
|---|---|---|---|
| State | Gas Tax | Other Taxes and Fees* | Total Taxes |
| Alabama | 28 cents | 1.2 cents | 29.2 cents |
| Alaska | 8 cents | 0.95 cents | 8.95 cents |
| Arizona | 18 cents | 1 cent | 19 cents |
| Arkansas | 24.5 cents | 0.3 cents | 24.9 cents |
| California | 57.9 cents | 10.2 cents | 68.1 cents |
| Colorado | 22 cents | 3.94 cents | 25.94 cents |
| Connecticut | 25 cents | 25 cents | |
| Delaware | 23 cents | 23 cents | |
| D.C. | 23.5 cents | 10.7 cents | 34.2 cents |
| Florida | 4 cents | 33.3 cents | 37.3 cents |
| Georgia | 31.2 cents | 0.75 cents | 31.95 cents |
| Hawaii | 16 cents | 2.5 cents | 18.5 cents |
| Idaho | 32 cents | 1 cent | 33 cents |
| Illinois | 45.4 cents | 21.1 cents | 66.5 cents |
| Indiana | 34 cents | 21.5 cents | 55.5 cents |
| Iowa | 30 cents | 30 cents | |
| Kansas | 24 cents | 1.03 cents | 25.03 cents |
| Kentucky | 28.7 cents | 1.4 cents | 30.1 cents |
| Louisiana | 20 cents | 0.93 cents | 20.93 cents |
| Maine | 30 cents | 1.4 cents | 31.4 cents |
| Maryland | 31 cents | 16.19 cents | 47.19 cents |
| Massachusetts | 24 cents | 3.2 cents | 27.2 cents |
| Michigan | 28.6 cents | 19.1 cents | 47.7 cents |
| Minnesota | 28.5 cents | 2.1 cents | 30.6 cents |
| Mississippi | 18 cents | 0.4 cents | 18.4 cents |
| Missouri | 24.5 cents | 0.47 cents | 24.97 cents |
| Montana | 33 cents | 0.75 cents | 33.75 cents |
| Nebraska | 29 cents | 0.9 cents | 29.9 cents |
| Nevada | 23 cents | 0.81 cents | 23.81 cents |
| New Hampshire | 22.2 cents | 1.63 cents | 23.83 cents |
| New Jersey | 10.5 cents | 30.95 cents | 41.45 cents |
| New Mexico | 17 cents | 1.88 cents | 18.88 cents |
| New York | 8 cents | 18.48 cents | 18.48 cents |
| North Carolina | 40.5 cents | 0.25 cents | 40.75 cents |
| North Dakota | 23 cents | 0.03 cents | 23.03 cents |
| Ohio | 38.5 cents | 38.5 cents | |
| Oklahoma | 19 cents | 1 cent | 20 cents |
| Oregon | 38 cents | 38 cents | |
| Pennsylvania | 61.1 cents | 1.1 cents | 62.2 cents |
| Rhode Island | 37 cents | 1.12 cents | 38.12 cents |
| South Carolina | 28 cents | 0.75 cents | 28.75 cents |
| South Dakota | 28 cents | 2 cents | 30 cents |
| Tennessee | 26 cents | 1.4 cents | 27.4 cents |
| Texas | 20 cents | 20 cents | |
| Utah | 34.5 cents | 0.65 cents | 35.15 cents |
| Vermont | 12.1 cents | 20.42 cents | 32.52 cents |
| Virginia | 29.8 cents | 9.3 cents | 39.1 cents |
| Washington | 49.4 cents | 3.42 cents | 52.82 cents |
| West Virginia | 20.5 cents | 16.7 cents | 37.2 cents |
| Wisconsin | 30.9 cents | 2 cents | 32.9 cents |
| Wyoming | 23 cents | 1 cent | 24 cents |
What Do Gas Taxes Cover?
The bulk of revenue from gas taxes goes toward fixing wear and tear on the country’s roadways from all that driving. In fact, about half of the states have laws requiring that money raised by fuel taxes pay for roads and bridges. Most of the other states dedicate the revenue toward various modes of transportation, with New York spending more than a third of its gas tax proceeds on mass transit.
Some states use the money for transportation-related purposes, such as law enforcement, environmental protection, and education. For example, Texas dedicates a quarter of its gas tax revenue to schools.
At the federal level, nearly all funding goes into the Highway Trust Fund. One-tenth of a cent in federal taxes from each fuel gallon goes toward cleaning up leaks from underground petroleum storage tanks. Out of the 18.3 cents per gallon federal tax, 15.44 cents goes to the highway account. The mass transit account receives 2.86 cents. This is the latest information, which is from 2021. Note that the federal tax is 18.4 cents per gallon.
However, gas taxes raised at the state and federal levels are increasingly falling short of what’s needed to maintain and expand the country’s roads. In 2023, the Congressional Budget Office estimated a cumulative shortfall of $241 billion for the Federal Highway Fund’s highway and mass transit spending through 2033.
Given the increasing shortfalls, federal and state officials will need to consider how to keep paying for paving the country’s roadways and fixing its potholes. At the federal level alone, the cumulative funding shortfall in the Highway Trust Fund is expected to reach $241 billion by 2033.
While hiking the gas tax and allowing it to rise with inflation have become popular solutions to the funding shortfall, some states have also started charging electric vehicle owners an annual fee. The funding issue will likely only grow in urgency as the country’s infrastructure, already barely getting a passing grade, continues to age, with the American Society of Civil Engineers’ Report Card scoring its state a C-.
The good news is that the federal government budgeted $1.2 trillion toward infrastructure spending, including $110 billion for road and bridge repair and $39 billion to modernize transit, under the Infrastructure Investment and Jobs Act passed in 2021.
How Much is the Federal Gas Tax in the US?
The United States federal excise tax on gasoline is 18.4 cents per gallon and 24.4 cents per gallon for diesel fuel. Proceeds from the tax partly support the Highway Trust Fund. The federal tax was last raised on October 1, 1993, and is not indexed to inflation, which increased 111% from Oct. 1993 until Dec. 2023.
On average, as of April 2019, state and local taxes and fees add 34.24 cents to gasoline and 35.89 cents to diesel, for a total US volume-weighted average fuel tax of 52.64 cents per gallon for gas and 60.29 cents per gallon for diesel.
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¢/gal (0.3¢/L). Since 1993, the US federal gasoline tax has been unchanged (and not adjusted for inflation of nearly 113 percent through 2023) at 18.4¢/gal (4.86¢/L). Unlike most other goods in the US, the price advertised (e.g., on pumps and stations’ signs) includes all taxes, as opposed to inclusion at the point of purchase (i.e., as opposed to prices of goods in, e.g., many stores advertised on shelves without tax which is instead calculated at checkout by many vendors).
Then-Secretary of Transportation Mary Peters stated on August 15, 2007, that about 60% of federal gas taxes are used for highway and bridge construction. The remaining 40% goes to earmarked programs, including a minority for mass transit projects. However, revenues from other taxes are also used in federal transportation programs.
Federal fuel taxes raised $36.4 billion in Fiscal Year 2016, with $26.1 billion raised from gasoline taxes and $10.3 billion raised from diesel and special motor fuel taxes. The tax was last raised in 1993 and is not indexed to inflation. Total inflation from 1993 until 2017 was 68 percent or up to 77 percent, depending on the source.
Some policy advisors believe an increased tax is needed to fund and sustain the country’s transportation infrastructure, including mass transit. As infrastructure construction costs have grown and vehicles have become more fuel efficient, the purchasing power of fixed-rate gas taxes has declined (i.e., the unchanged tax rate from 1993 provides less real money than it originally did, when adjusted for inflation).
To offset this loss of purchasing power, The National Surface Transportation Infrastructure Financing Commission issued a detailed report in February 2009 recommending a 10-cent increase in the gasoline tax, a 15-cent increase in the diesel tax, and a reform tying both of these tax rates to inflation.
Critics of gas tax increases argue that much of the revenue is diverted to other government programs and debt servicing unrelated to transportation infrastructure. However, other researchers have noted that these diversions can occur in both directions and that gas taxes and “user fees” paid by drivers are not high enough to cover the full cost of road-related spending.
Some believe an increased fuel cost would encourage less consumption and reduce America’s dependence on foreign oil. Americans sent nearly $430 billion to other countries in 2008 for the cost of imported oil. However, significantly since 2008, increased domestic output (e.g., fracking of shale and other energy resource discoveries) and rapidly growing production efficiencies have reduced considerably such spending, and this falling trend is expected to continue.
How Have State Gas Taxes Changed Over Time?
In most states the gas tax is a per unit tax. That is, the consumer pays tax based on the number of gallons purchased rather than a percentage of the final purchase price. As a result, tax revenue increases only if drivers buy more gasoline or lawmakers raise the tax rate.
During the past two decades, Americans drove fewer miles and purchased more fuel-efficient vehicles. Consequently, aggregate gasoline consumption stagnated.
For most of this period, most states did not respond to a flat or declining tax base with tax rate hikes, and as a result inflation-adjusted state and local motor fuel tax revenue was higher in 2007 ($47.2 billion) than it was in 2014 ($46.8 billion). At the same time, construction costs and demands for transportation project spending continued to increase. Thus, many states faced transportation funding gaps.
As a result, in recent years, many states have made changes to their gas tax. Between 2013 to 2021, 33 states and the District of Columbia enacted legislation that increased their gas tax—but often in different ways.
In fact, states have various options when increasing transportation funding, including:
- Raise the gas tax rate. States can compensate for the decline in gasoline consumption by raising the per gallon tax rate. In 2017, for example, Indiana raised its per gallon rate from 18 cents to 28 cents. Although increasing the rate with legislation is simple, it is often politically difficult.
- Tie the gas tax rate to the price of gasoline. Twelve states and the District of Columbia tie a portion of their gas tax rate to the price of gasoline. This option helps raise revenue when the price of gasoline is high, but it is counterproductive when gasoline prices fall. For example, Kentucky and North Carolina previously tied a large share of their tax rates to gas prices. When gas prices peaked in the early 2010s these states had two of the highest gas tax rates in the country, but when prices dropped their legislatures had to scramble to prevent large rate declines and revenue losses. In 2015, Kentucky created a new tax rate “floor” and in 2017 North Carolina stopped using gas prices and instead began calculating its gas tax rate based on population and inflation growth. As a result, no state currently ties a large portion of their tax rate to the price of gasoline.
- Tie the gas tax rate to inflation or population. In 2013, Maryland raised its gas tax rate to 27 cents and tied future increases to the consumer price index. As a result, the state’s per gallon tax rate has increased roughly 15 cents since then. The rate will continue to slowly increase as long as consumer prices go up. These automatic rate increases help states maintain gas tax revenue as gas consumption slows. California, the District of Columbia, Florida, Georgia, Illinois, Michigan, North Carolina, Utah, and Virginia also use inflation in their gas tax rate calculations. Some states are also now experimenting with other gas tax rate formulas that would have similar effects. For example, North Carolina uses population growth and Georgia uses fuel-efficiency standards in their rate calculations.
- Use toll roads. States are increasingly using toll roads, charging drivers a fee to use specific roads, to generate revenue for infrastructure projects. State and local governments collected $19.1 billion in toll highway charges in 2020, up from $8.3 billion in 2000 (in 2020 inflation-adjusted dollars). Thus, over that time period, revenue from toll highway charges increased 132 percent while gas tax revenues only increased 13 percent.
Tax miles traveled instead of gasoline. Oregon and Utah are currently running pilot programs that tax certain drivers’ vehicle miles traveled (VMT) instead of gasoline purchased. The US Department of Transportation is also providing funding for additional VMT studies in several other states, and the Infrastructure Investment and Jobs Act created a national motor vehicle per-mile user fee pilot program.
The hope is that a VMT tax can provide a more stable tax base as drivers increasingly purchase hybrid and electronic vehicles. However, there are administrative challenges with a VMT tax and governments would still need to set tax rates high enough to produce the desired amount of revenue.
