What Is the Federal Gasoline Excise Tax Rate?

Definition and Examples of the Federal Gasoline Excise Tax

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The federal gasoline excise tax was first introduced in 1933 at just 1 cent per gallon. The tax pays for transportation-related infrastructure projects, as well as mass transportation costs across the U.S.

The rate has been raised 10 times since 1933, but it hasn't increased since 1993. It's 18.4 cents per gallon as of 2020.

What Is the Federal Gasoline Excise Tax?

Excise taxes are imposed on the sale of specific goods, from indoor tanning facilities to gasoline. These taxes are passed on to consumers because they're built into the purchase price of the product. Gasoline would cost you less without this tax padding the per-gallon cost.

The federal gasoline excise tax is actually a combination of two taxes. It includes a 0.1 cent per gallon Leaking Underground Storage Tank (LUST) fee, which is added to the tax-per-gallon rate on both gasoline and diesel fuel.

The LUST fee goes into a trust fund that was created in 1986. It's intended to prevent petroleum leaks from federally-regulated underground storage tanks. It also funds the oversight and enforcement of cleanup of petroleum leaks. It pays for cleanup when the responsible party isn’t known, and it funds inspections.

How the Federal Gasoline Excise Tax Works

Federal gas taxes are put into the Highway Trust Fund to pay for infrastructure and transportation costs, and this has been a point of contention among many groups over the years. The White House issued a statement in February 2018 indicating that one out of every five miles of highway pavement is in poor condition. Experts say that raising the gas excise tax could help alleviate some of these issues.

Depending on where you live and how much gas costs in your state, the existing federal gasoline excise tax and each state’s gasoline tax can already make a big difference in the price you pay at the pump.

According to AAA, the five states with the highest gas prices for regular fuel as of 2020 were:

  • California: $3.24 per gallon
  • Hawaii: $3.22 per gallon
  • Washington: $2.83 per gallon
  • Nevada: $2.68 per gallon
  • Oregon: $2.66 per gallon

The national average was $2.22 per gallon as of September 2020.

State Taxes on Gasoline

Each state additionally tacks its own tax onto every gallon of gas that's sold there. According to the American Petroleum Institute, the states with the highest gas taxes as of July 2020 were:

  • California: 62.47 cents per gallon
  • Pennsylvania: 58.7 cents per gallon
  • Illinois: 52.01 cents per gallon
  • Washington: 49.4 cents per gallon

The states with the lowest state gas taxes in July 2020 were:

  • Alaska: 13.77 cents per gallon
  • Missouri: 17.42 cents per gallon
  • Mississippi: 18.79 cents per gallon

The map below breaks downs gas tax by state.

The average state gasoline tax as of July 2020 was 29.86 cents per gallon. State gas taxes help fund things like road repair, road construction, and necessary maintenance.

Do I Need to Pay So Much for Gas?

Consider saving on fuel costs by taking public transportation or by combining trips, such as running errands on your way home from work if the cost of gas is wrecking your monthly budget, whether due to a long commute or travel-heavy job. Carpooling with coworkers is also an excellent way to save cash, and it will save you that rush hour headache.

The price of gas is affected by crude oil prices, as well as the costs of distribution and marketing. World politics can also play a part in the rise and fall of gas prices, as can supply and demand.

You can also cut back on the time you spend warming up your car to save gas. Driving more slowly and steadily can save you some fuel, too, as can avoiding excessive braking. Idling, such as when you're waiting to pick someone up or sitting in a parking lot, is another major gas-waster.

You might have heard that using your air conditioning uses up gas and this is true, but so does having a window open. The wind resistance increases drag and this uses more gas. Using your air conditioner's fan setting is your best bet. Keeping your tires and engine in good condition can also save you some gas dollars.

Try using apps that help you save money on gas by locating the cheapest gas in a given area. Some will even reward you with loyalty points and other perks when you use their apps.

Key Takeaways

  • The federal gasoline excise tax is 18.4 cents per gallon as of 2020.
  • This tax pays for infrastructure projects and mass transportation costs, and it includes a 0.1 cent per gallon fee that goes to the Leaking Underground Storage Tank trust fund.
  • States additionally tack on their own gasoline excise taxes to every gallon you buy, which can significantly increase the overall tax rate.
  • Excise taxes are built into the purchase price of products.

Article Sources

  1. Tax Policy Center. "Federal Excise Tax and Fees on Motor Fuels." Accessed Sept. 6, 2020.

  2. United States Environmental Protection Agency. "Leaking Underground Storage Tank (LUST) Trust Fund." Accessed Sept. 6, 2020.

  3. The White House. "Building a Stronger America: Addressing America’s Infrastructure Needs." Accessed Sept. 6, 2020.

  4. AAA. "Gas Prices." Accessed Sept. 6, 2020.

  5. American Petroleum Institute. "Notes to State Motor Fuel Excise and Other Taxes." Accessed Sept. 8, 2020.

  6. U.S. Energy Information Administration. "Frequently Asked Questions (FAQs)." Accessed Sept. 6, 2020.