Alliance for Innovation and Infrastructure | Aii Asks: What tax does the federal government add to every gallon of gasoline you pump? - Alliance for Innovation and Infrastructure
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Aii Asks: What tax does the federal government add to every gallon of gasoline you pump?

28 Nov 2019, Posted in Aii Asks, All Posts, Blog Posts

Question:

The Interstate Highway System and other roads and bridges in America are supported by the Highway Trust Fund. The main revenue source is a gasoline tax.

Our policy team asks, “What tax does the federal government add to every gallon of gasoline you pump? ” 

 

Answer:

70 percent of our audience correctly picked 18.4 cents, while 30 percent picked 7.5 cents.

Since 1993, the federal tax for each gallon of gasoline has been 18.4 cents. For those pumping diesel fuel, that tax is 24.4 cents for every gallon. That means that when you fill up for $2.35 per gallon, you are really paying closer to two dollars for gas, 18.4 cents to the federal government for road maintenance, and 10 to 20 cents to the state and local government.

Despite greatly increased fuel efficiency in the automotive fleet on the road, and rise in hybrid and electric vehicles, the gas tax has not been increased in over 25 years. It is not indexed to inflation or adjusted based on fuel efficiency or type of vehicle. This means that the revenue source for the Highway Trust Fund is weakened over time, as vehicles use less gas to drive the same mileage – and commit the same amount of wear and tear on the roads.

The federal gas tax was initially applied in 1932, coming in at one cent per gallon. Over the 87 ensuing years, the rate has been altered only 10 times. As the primary revenue source for maintenance and repairs for roads and bridges across the nation, this tax is critical to America’s infrastructure. It is intended as a user fee, so drivers pay for roads and infrastructure as they drive by fueling up. Many believe the tax should be increased or indexed to inflation, so that it automatically raises as the economy ebbs and flows. Still others see the fuel efficiency as a serious problem and believe a direct mileage tax is more preferable than a proxy for mileage like the gas tax. Less politically popular ideas include tolls, general tax increases, road permits or license fees, and bond financing.

• Are you surprised to learn how much the federal government taxes you while you drive?

 

• Does this seem too low of a tax?

 

• What solutions do you have for fixing our crumbling roads and bridges, and how do we pay for it? 

 

Learn more about the Highway Trust Fund here.