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 one cent per gallon. The tax pays for transportation-related infrastructure projects, as well as mass transportation costs throughout the United States.

The rate has been raised 10 times since 1933, but it hasn’t increased since 1997. It is currently 18.4 cents per gallon.

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 price.

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 petroleum leak cleanups. It pays for cleanup when the responsible party isn’t known and 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 American society of Civil Engineer's Report Card for America's Infrastructure notes that 40% of the nation's roadways are in "poor" or "mediocre" condition. Some experts say that raising the gas excise tax could help fund improvements.

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 the American Automobile Association, the five states with the highest gas prices for regular unleaded gasoline as of December 2021 were:

  • California: $4.68 per gallon
  • Hawaii: $4.34 per gallon
  • Nevada: $3.89 per gallon
  • Washington: $3.87 per gallon
  • Oregon: $3.78 per gallon

The national average was $3.34 per gallon.

State Taxes on Gasoline

In addition to the federal tax, each state tacks on its own tax to every gallon of gas that’s sold there. According to the American Petroleum Institute, the states with the highest gas taxes as of July 2021 were:

  • California: 66.98 cents per gallon
  • Pennsylvania: 58.70 cents per gallon
  • Illinois: 59.56 cents per gallon
  • New Jersey: 50.70 cents per gallon

The states with the lowest state gas taxes in July 2021 were:

  • Alaska: 14.98 cents per gallon
  • Missouri: 17.42 cents per gallon
  • Mississippi: 18.79 cents per gallon
  • New Mexico: 18.88 cents per gallon

The map below breaks down gas tax by state.

The average state gasoline tax as of July 2020 was 30.63 cents per gallon, according to the U.S. Energy Information Administration. State gas taxes help fund things like road repair, road construction, and necessary maintenance.

Do I Need To Pay So Much for Gas?

There's not a lot you can do to control the cost of gasoline (or how it's taxed), but you can influence how much you spend by buying less of it. Consider saving on fuel costs by taking public transportation or 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 co-workers is also an excellent way to save cash and 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.

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 was 18.4 cents per gallon as of 2021.
  • This tax pays for infrastructure projects and mass transportation costs and 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.