How much is my state gas tax?

The smartest college students in Boston know that on the way back from a ski trip, you’ve got to stop at the liquor store to pick up supplies before you cross the border back into Massachusetts. That’s because New Hampshire has no alcohol tax, whereas Massachusetts takes $4.05 per gallon in taxes from the sale of the standard volume spirits with 40% alcohol.

It turns out that the same discrepancies exist for fuel taxes. In addition to the federal tax of 18.4 cents per gallon (CPG) for gasoline, each state issues unique taxes and fees which are compounded with federal rate.

These additional costs vary significantly across state lines. On the low end, Alaska collects 12.4 CPG for gasoline on top of the federal tax. On the high end, New York collects 50.5 CPG.

In this study, we’ve taken the federal tax out of the equation in order to analyze patterns and differences in state fuel taxes. Like so many “cost of living” heat maps, the discrepancy between the coasts and the interior of the US is striking. The four most expensive states to live in, according to CNBC, are New York, California, Connecticut and Hawaii. These are also the four states with the highest taxes on gasoline. Fun fact: the fifth most expensive state to live in, Alaska, has the cheapest gasoline taxes. Drill baby, drill!

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It’s worth noting that gas taxes can vary within states. In Oregon, for example, gas taxes vary by as much as five CPG across counties. In some states, gas is taxed differently depending on use. In North Dakota, an additional excise tax of two percent is imposed on gasoline sold for use in anything other than a licensed vehicle. This addition is waived, however, if the gasoline is for heating. Good thing, because I hear it gets pretty cold up in North Dakota. That’s why Paul Bunyan was always wearing those thick flannels.

Diesel is also taxed at varying degrees across the country. The federal tax rate for diesel is 24.4 CPG, six CPG more than gasoline. No surprise there since diesel is more expensive at the pumps and that’s where the consistency ends. In some states, diesel is taxed more than gasoline, in some it is taxed less, and in some it is taxed the same. For all but six states, the difference is within five CPG unless you live in Pennsylvania where diesel is taxed at 10.3 CPG more than gasoline, you might want to avoid getting that turbo diesel.

Like gas taxes, state diesel taxes have their own intricacies. In Arizona, diesel is taxed at 19 CPG for light vehicles, the same rate as gasoline. For trucks with more than two axles or a gross weight over 26,000 pounds, diesel is

taxed at 27.0 CPG. In Illinois, diesel blends of more than 10% biodiesel are exempt from state and local sales taxes, though this exemption is set to expire at the end of 2018.

Given these intricacies, what can we expect from gas taxes in the future? In the past, gas taxes have been levied as a source of revenue. Oregon was the first to tap into this stream by enacting a gas tax in 1919. Less than a decade later, the remaining 47 states took similar measures.

Over the years, many have thought of fuel taxes as a “user fee” that frequent motorists are charged in order to offset transportation infrastructure construction and maintenance costs. More recently, the environmental implications of fuel taxation has come to light. California, which already has the second highest gas tax at 49.78 CPG, is imposing an additional gas tax in January 2015 as a provision of a climate change bill passed by Former Governator, Arnold Schwarzenegger.

The California Air Resources Board predicts that the tax will raise gasoline prices anywhere from 20 cents to $1.30 per gallon. At the high end of that range, there would be significant pressure for motorists to limit fuel consumption either by using public transportation or by switching to more fuel efficient vehicles.

Drivers outside of the United States have long been forced to make such concessions. In Europe, for example, where gas prices can reach $10.00 a gallon, the vast majority of cars are manual transmission and pretty tiny compared to the average American car. In the US it is hard to find small cars in suburbia or a stick shift outside of a Mazda Miata. In 2011, 63% of Miata soft-tops  and 49% of hard-tops sold were manual. Overall, only 6.5% of vehicles in the US are currently sold with manual transmission.

Other than saving the environment, an increase in US gas taxes could result in a resurgence of the stick shift which have historically achieved better gas mileage than their automatic counterpart. This could be a critical step in delaying the onset of the driverless car because it would remind the general population of the joys of driving. More likely is the increased gas taxes would accelerate the adoption of alternate energy sources like electric and hydrogen power. With financial and environmental pressures mounting, these alternatives become more feasible and more needed every day.

Still, we have yet to see an affordable electric vehicle that offers a total range over 100 miles. More efficient hybrid and internal combustion engines are a good intermediary, but in many cases the hybrid option does not offer significant savings. In a recent study, we found that the same is true for diesels .

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Category: Taxes

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