Monday, November 17, 2014

Gasoline Taxes per State

Mark Knold, Supervising Economist

All who purchase gasoline are probably noticing—and enjoying—the recent decline in gasoline prices. Pundits who follow the industry tell us these low prices should continue to hold through 2015, and a plentiful supply of oil is what they expect for years to come. The recent technological revolution in how oil is extracted has breathed life back into America’s oil production, as older oil fields such as in Texas and even Utah’s Uintah Basin are back to producing like they did 30 years ago. The relatively new shale formation oil production has been unleashed, most prominently in the North Dakota region. All of this, in addition to Saudi Arabia’s recent announcement that it will keep the taps flowing, makes for a world awash with oil. Therefore, oil prices are expected to remain low and so should gasoline prices.

But oil isn’t the only cost in a gallon of gas. There are refining costs and shipping costs. And then there are taxes—federal, state, and even local in some states (but not Utah). Not often does the tax cost enter our minds as we fill our tanks. After all, the tax rates are virtually constant, and it is the variability of the oil prices, refining costs, or seasonal demands that change the price at the pump. But the tax costs are there.



Gasoline taxes are a user fee. They help finance the construction and maintenance of roads and bridges, and the user of those products pay a major portion of that cost. Roads and bridges are social goods (we all need them), and from an economic standpoint it makes sense that these social goods are paid for with a social payment—a tax. The federal government has its part in this taxation at 18.4 cents a gallon from cost-to-coast. Therefore, any variability in gasoline taxes from state-to-state comes from variable state tax rates.

Do higher gasoline tax rates hurt states? Probably only very little, and even then only along its borders where it is practical to go into another state to fill up. When my car needs gas, I don’t drive the 80 miles to Wyoming to fill it. The taxes are a cost you will absorb wherever you are, whether at home or while traveling.

None of this writing is to debate the need for, or the level of, a gasoline tax. It is only to remind us that there is a gasoline tax, and to pass along to those who are curious like myself, as to what all states charge in the way of a gasoline tax and how Utah compares in the mix. I found this short blog on the subject with maps informative, and thought you might also enjoy looking it over.

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