Gas Tax

Gas Guzzler Tax

Federal Gas Tax

gas pump

taxes we pay at the pump

Gas tax, also known as fuel, petrol or gasoline tax, is a type of excise tax that is obligatory on fuel sales much like the mandatory federal income tax. Since fuel is used to power vehicles, provide heating systems and to transport goods for long distances, fuel taxes can differ depending on what type and usage. Diesel fuel, used in operating agricultural vehicles and large trucks and tractors has lesser federal gas tax.

The value of fuel in the world economy is off the charts. The demand for petrol is big all over the world and the tax law regarding it differs from one country to another. Since its supply is not as steady and the market price fluctuates with the supply and demand, gas tax changes constantly.

In the United States, the first recorded obligatory federal gas tax started on June 6, 1932, following the endorsement of the Revenue Act of 1932. However, gas taxes really began in Oregon in February 1919. The District of Columbia followed right after, but the imposition of tax on fuel wasn’t in a lawful nationwide scale. After passing the law in 1932, fuel tax has been monitored  and regulated by the American Petroleum Institute, using a subjective average local fuel tax depending on the population of each area or municipality in coming up with an average gas tax for the whole state.

gas tax

gas taxes

As of the moment, the imposed federal gas tax on gasoline is currently averaging at 18.4 cents per gallon and 24.4 cents per gallon for diesel fuel. On top of that, an additional 31.1 cents to gasoline and 30.2 cents to diesel fuel of state and local taxes were added, accumulating a total of 49.5 cents gas tax on gasoline and 54.6 cents per gallon on diesel fuel as of April 2012.

It is a general consensus that federal gas tax generates a lot of revenue for the government. In 2006, the total amount of taxes generated amounted to twenty-five billion dollars, which was then used for federal transportation programs and to build and maintain transportation infrastructure like highways and bridges all over the country. The revenue generated from gas tax averages on twenty billion dollars every year and the money immediately goes to the Highway Trust Fund. This is a US transportation fund which currently has three accounts: Mass Transit Account, Highway Account and Leaking Underground Storage Tank Trust Fund.

gas tax

gas tax

In some European countries like France and the United Kingdom, they use gas tax to discourage people from using fossil fuels to reduce pollution as well as traffic. However, because of the differences in gas tax imposed in different countries in Europe which often have large differences, this results to cross-border buying of fuel. This also encourages drivers to cross borders that are minimally guarded just to purchase motor fuel at a lower price.

During the energy crisis experienced in recent years, fuel prices have risen to big proportions. It was proposed that gas taxes be temporarily or permanently suspended to circumvent the negative effects of oil shocks in numerous developed and developing countries. Some countries, especially the members of the European Union or EU, had pressured OPEC (Organization of the Petroleum Exporting Countries) to lower the prices of petrol instead of lowering gas taxes in order to offset the budget deficits experienced during this period. But there are some countries that lowered their gas taxes in response to the dissent over high petrol prices.

oil prices

gas tax for consumers

Thinking green and conserving the environment has made several public policies regarding increasing federal gas tax to influence less consumption of fuel that will help lessen the percentage of carbon footprint produced. Transport gas taxes have been used to advocate ways and schemes in reducing pollution, energy conservation and the causes and effects of global warming.

In funding different public infrastructure and environmental conservation programs, gas tax comprises the bulk of the revenue used in these programs and schemes in many countries. At times, gas tax is considered as ecotax to support and promote ecological sustainability and various projects to reduce carbon footprints. With the dawn alternative energy, the cost of buying petrol with the added gas tax is almost the same with the prices of natural gas, electric batteries for transport and biodiesel.

Apart from imposing gas tax as a way to reduce pollution and conserve nature, an environmental tax called “carbon tax” – a form of carbon pricing – is levied on the carbon contents of fuels to encourage people to be more concerned about exhausting carbon dioxide and carbon monoxide into the atmosphere. These attempts will help make people be aware of the consequences of misusing energy.

To learn more about federal tax on gas click here