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 the locality in which the fuel is purchased. For instance, while drivers in Mississippi pay a total of 36.8 cents per gallon of gas in federal and state taxes, drivers in California pay a whopping 83.5 cents in federal and state taxes on that same gallon of gas. 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 Engineers’ Report Card for America’s Infrastructure notes that more than 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 fee of .01 cent per gallon for the leaking underground storage tank (LUST), 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. Gas prices can differ by state, and they change frequently. For example, on Nov. 9, 2022, California’s average gas price was $5.453 per gallon and Virginia’s average price was $3.511 per gallon, according to AAA.
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. Here are some of the highest and lowest state gas taxes, according to the American Petroleum Institute:
Alaska: 15.13 cents per gallonCalifornia: 68.15 cents per gallonIllinois: 59.60 cents per gallonMississippi: 18.79 cents per gallonMissouri: 19.92 cents per gallonNew Jersey: 50.70 cents per gallonNew Mexico: 18.88 cents per gallonPennsylvania: 58.70 cents per gallon
The map below shows the amount of federal and state taxes on a gallon of gas in each state. The average in the U.S. is 57.09 cents per gallon.
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 a 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.
