Definition and Example of the Federal Gasoline Excise Tax Rate
The federal gasoline excise tax is a tax that was implemented to fund transportation-related projects across the United States. It was first introduced through the Revenue Act of 1932 at a rate of $0.01 per gallon, generating $125 million during its first year. The rate has gone up slowly through the years and currently stands at $0.184 per gallon.
The federal gas tax is an excise tax, which is a type of tax imposed on the sale of specific goods, such as gasoline. These taxes are passed on to consumers, because they’re built into the purchase price of the product.
While consumers throughout the U.S. pay the same federal gas excise tax rate whenever they buy a gallon of gas, the total amount they pay for that gas depends on the laws of the state and locality in which the fuel is purchased. For instance, while drivers in Mississippi pay a total of $0.20 per gallon of gas in federal and state taxes, drivers in California pay a whopping $0.67 for that same gallon of gas.
The federal gasoline excise tax rate is currently $0.184 a gallon. The rate has been raised 10 times since 1933, but it hasn’t increased since 1997.
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 policy 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.
The federal gasoline excise tax is a combination of two taxes. It includes a $0.001-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 it funds inspections.
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.
An example of how gas rates can change by state is this snapshot of the five states with the highest gas prices for regular unleaded gasoline as of March 2022, per the American Automobile Association:
- California: $5.730 per gallon
- Hawaii: $4.935 per gallon
- Nevada: $4.932 per gallon
- Oregon: $4.735 per gallon
- Washington: $4.730 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. The states with the highest state gas taxes were, according to the American Petroleum Institute's January 2022 report:
- California: $0.6815 per gallon
- Pennsylvania: $0.5870 per gallon
- Illinois: $0.5960 per gallon
- New Jersey: $0.5070 per gallon
The states with the lowest state gas taxes were:
- Alaska: $0.1513 per gallon
- Missouri: $0.1992 per gallon
- Mississippi: $0.1879 per gallon
- New Mexico: $0.1888 per gallon
The map below breaks down gas tax by state.
Alternatives to Paying the Federal Gasoline Excise Tax
There's not a lot you can do to control the gasoline excise tax rate or the cost of fuel, 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.
Try using apps that help you save money on gas by locating the cheapest options in a given area. Some will even reward you with loyalty points and other perks when you use their apps.
- The federal gasoline excise tax was $0.184 per gallon as of 2022.
- This tax pays for infrastructure projects and mass transportation costs and includes a $0.001 per gallon fee that goes to the leaking underground storage tank (LUST) 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.