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Gasoline Excise Taxes, 1933-2000 - Statistical Data Included
Brian FrancisThe Federal excise tax on gasoline is currently 18.4 cents per gallon. This excise tax generates over $20 billion per year in tax revenue. Revenues are currently 170 times the amount generated in 1933, the first year of the Federal gasoline excise tax. Receipts from this tax are the major source of revenue for the Highway Account and the Mass Transit Account, which together make up the Highway Trust Fund. These taxes are used as a type of user fee. However, in recent years, the gasoline excise tax and the tax on other motor fuels have been used for additional purposes, for example, to reduce the Federal Budget deficit.
Origins
The Federal excise tax on gasoline was first proposed in 1914 when the Ways and Means Committee of the U.S. House of Representatives recommended a 2-cents-per-gallon tax. The bill failed, but President Woodrow Wilson proposed the levy be adopted the following year. Once again, the gasoline tax failed to pass Congress. It was not until 1919, when Oregon became the first State to pass an excise tax on gasoline, that taxes on gasoline became common. Within 10 years, every State in the Union had adopted a gasoline excise tax [1]. Every State currently imposes an excise tax on gasoline, though the rates vary. In 1999, these taxes generated $29 billion [2].
The Revenue Act of 1932 was passed by Congress to uphold U.S. credit and balance the Federal Budget [3]. The Act instituted a Federal excise tax on gasoline of 1 cent per gallon and reinstated a whole series of excise taxes that had been in effect during World War I, and a few of which are still in effect. The gasoline excise tax was by far the most lucrative, generating $125 million in its first year. Figure A shows the excise taxes, the amount of revenue raised in 1933, and their current status. These excise taxes comprised over 15 percent of the $1.6 billion of internal revenue collected for Fiscal Year 1933.
Figure A
Federal Excise Taxes, Fiscal Year 1933
[Money amounts are in whole dollars]
Excise tax Receipts in In effect
FY 1933 FY 2001
Total 247,751,425 N/A
Gasoline 124,929,412 Yes
Electrical energy 28,562,739 No
Lubricating oils 16,232,925 No
Tires and inner tubes 14,980,085 Yes(1)
Other automobiles and motorcycles 12,573,922 Yes(2)
Toilet preparations, etc 9,602,539 No
Articles made of fur 7,546,274 No
Brewers' wort, malt, grape concentrate, etc 5,707,905 No
Soft drinks 4,186,447 No
Candy and chewing gum 4,150,228 No
Parts or accessories for automobiles 3,597,276 No
Jewelry 3,068,494 No
Matches 2,871,992 No
Sporting goods 2,701,680 Yes(3)
Radio sets, phonograph records, etc 2,206,763 No
Mechanical refrigerators 2,111,869 No
Automobile trucks 1,654,040 Yes(4)
Firearms, shells and cartridges 896,833 Yes
Cameras and lenses 170,002 No
(1) Limited to heavy tires.
(2) Limited to luxury cars and "gas guzzlers."
(3) Limited to bows, arrows, and sport fishing equipment.
(4) Limited to heavy trucks and trailers.
At its introduction, the Federal gasoline excise tax was considered temporary. Indeed, the Senate Finance Committee's report of May 10, 1933, stated:
Your committee is of the opinion that the gasoline tax should be reserved for the States after June 30, 1934. It would be entirely appropriate, therefore, for this committee, which originated the Federal gasoline tax as a temporary expedient, to recommend its repeal [4].
In the early 1930's, the gasoline tax was viewed as a revenue source for the States, since it was the States that built and maintained highways at that time. Moreover, the gasoline tax provided a significant portion of State revenues. Sales taxes and lotteries were not in use by States in the early part of the 20th century, and income taxes were relatively new. However, the Federal gasoline excise tax was not repealed, and, in fact, the rate has periodically increased throughout the years, as shown in Figure B.
Figure B Legislative History 1932 - Revenue Act of 1932 creates gasoline excise tax at 1 cent per gallon. 1940 - Revenue Act of 1940 increases gasoline excise tax to 1.5 cents per gallon. 1951 - Revenue Act of 1951 increases gasoline excise tax to 2 cents per gallon. 1956 - Highway Revenue Act of 1956 creates the Highway Trust Fund and increases gasoline excise tax from 2 to 3 cents per gallon. 1959 - Federal-Aid Highways ACt increases gasoline excise tax to 4 cents per gallon. 1964 - Urban Mass Transportation Act of 1964 creates Mass Transit Account. 1982 - Surface Transportation Assistance ACt of 1982 increases gasoline excise tax to 9 cents per gallon. 1986 - Congress establishes the Leaky Underground Storage Tank Trust Fund (LUST), equal to 0.1 cent per gallon of gasoline. 1990 - LUST expires August 31, 1990. 1990 - Omnibus Reconciliation Act of 1990 increases the gasoline excise tax from 9 to 14 cents per gallon and LUST is reinstated. 1990 - Revenue Reconciliation act of 1990 first designates receipts from gasoline excise tax to be used for Federal budget deficit reduction. 1991 - Gasoline excise tax increases to 14.1 cents per gallon. 1993 - Omnibus Reconciliation ACt of 1993 increases amount of gasoline excise tax used for Federal budget deficit reduction. 1994 - Gasoline excise tax increases to 18.4 cents per gallon. 1996 - LUST expires. 1997 - LUST reinstated October 1, 1997. 1997 - Taxpayer Relief Act of 1997 transfers 4.3 cents per gallon for deficit reduction to the General Fund. 1998 - Transportation Equity ACt for the 21st Century regulates the highway trust fund balances.
The Highway Trust Fund
The Highway Revenue Act of 1956 authorized the creation of the Highway Trust Fund. Revenue allocated to this fund was to be derived from receipts collected under various highway-user excise taxes. Certain percentages of receipts from taxes on gasoline, diesel and special motor fuels, tread rubber, tires and inner tubes, trucks, etc. were transferred from the General Fund of the Treasury to the newly created Highway Trust Fund.
The Mass Transit Account for expenditures was established by the Urban Mass Transportation Act of 1964. The gasoline excise tax was increased from 5 cents to 9 cents per gallon as a result of the Surface Transportation Assistance Act of 1982. The Act provided that 1 cent of the 5-cent increase be allocated for mass-transit purposes. The actual amount for the Highway Trust Fund for FY 1999 and estimates for FY 2000 are shown in Figure C.
Figure C
The Highway Trust Fund(1)
[Money amounts in millions of dollars]
Item FY 1999 actual FY 2000 estimate
Balance, start of year -17,529 -11,831
Receipts:
Highway account 33,821 29,638
Mass Transit account 5,478 4,673
Balances and collections 21,796 22,504
Appropriations -33,627 -36,711
Balance, end of year -11,831 -14,207
(1) Budget of the United States Government FY2001. Appendix page 761.
A description of the Highway Trust Fund taxes can also be found in
Francis, Brian, "Excise Taxes 1995-1997," Statistics of Income
Bulletin, Volume 11, Number 4, Spring 1998.
Increasing the Federal Gasoline Excise Tax Rate
Table 1 gives a complete time series of the Federal excise tax on gasoline receipts, as well as the rate of tax as of January 1 of each year. The tax rate has reached the current level of 18.4 cents per gallon through a series of incremental increases. At the end of 1990, the Omnibus Budget Revenue Reconciliation Act of 1990 (OBRA90) increased gasoline tax by 5 cents from 9.1 cents per gallon to 14.1 cents per gallon. The Act specified that 11.5 cents per gallon go to the Highway Trust Fund and that 2.5 cents per gallon be used for deficit reduction. OBRA90 also reinstated the Leaky Underground Storage Tank Trust Fund (LUST) at 0.1 cent per gallon.
Table 1.--Gasoline Excise Tax Receipts, Fiscal Years 1933-1999
Fiscal year Receipts (thousands Tax rate per gallon
of dollars) (in cents)
(1) (2)
1933 124,929 1.0
1934 202,575 1.0
1935 161,532 1.0
1936 177,340 1.0
1937 196,533 1.0
1938 203,648 1.0
1939 207,019 1.0
1940 226,187 1.0
1941 343,021 1.5
1942 369,587 1.5
1943 288,786 1.5
1944 271,217 1.5
1945 405,563 1.5
1946 405,695 1.5
1947 433,676 1.5
1948 478,638 1.5
1949 503,647 1.5
1950 526,732 1.5
1951 569,048 1.5
1952 713,174 2.0
1953 890,675 2.0
1954 835,610 2.0
1955 953,201 2.0
1956 1,030,397 2.0
1957 1,458,217 3.0
1958 1,636,629 3.0
1959 1,700,253 3.0
1960 2,015,863 4.0
1961 2,370,303 4.0
1962 2,406,001 4.0
1963 2,497,316 4.0
1964 2,618,370 4.0
1965 2,687,135 4.0
1966 2,824,189 4.0
Year Receipts (thousands Tax rate per gallon
of dollars) (in cents)
(3) (4)
1967 2,932,894 4.0
1968 3,030,792 4.0
1969 3,283,715 4.0
1970 3,430,076 4.0
1971 3,547,678 4.0
1972 3,741,160 4.0
1973 3,927,535 4.0
1974 4,087,669 4.0
1975 3,980,412 4.0
1976 4,180,860 4.0
1977 4,322,077 4.0
1978 4,444,484 4.0
1979 4,525,065 4.0
1980 4,218,147 4.0
1981 4,007,956 4.0
1982 4,214,373 4.0
1983 4,904,580 4.0
1984 9,021,518 9.0
1985 9,062,387 9.0
1986 8,854,674 9.0
1987 8,925,028 9.0
1988 9,167,139 9.1
1989 9,725,089 9.1
1990 9,465,647 9.1
1991 14,468,500 14.1
1992 14,759,324 14.1
1993 14,753,020 14.1
1994 19,794,300 18.4
1995 19,918,500 18.4
1996 19,653,800 18.3
1997 20,836,000 18.4
1998 20,644,998 18.4
1999 21,236,659 18.4
2000 n.a. 18.4
n.a.--not available
The Omnibus Reconciliation Act of 1993 (OBRA93) returned the 2.5-cent increase under OBRA90 to the Highway Trust Fund beginning October 1, 1995. OBRA93 also provided for a 4.3cent permanent increase in the gasoline excise tax to be dedicated to deficit reduction. These 4.3 cents added to the 2.5 cents of OBRA90 meant that 6.8 cents of the gasoline excise tax was dedicated to deficit reduction, between October 1, 1993, and October 1, 1995. In the Taxpayer Relief Act of 1997, Congress decided to be consistent with the user tax principle of highway motor fuel taxes; the existing 4.3-cents-per-gallon General Fund excise tax on highway motor fuels (for deficit reduction) was transferred to the Highway Trust Fund. In FY 2000, the 18.4-cents-per-gallon gasoline tax was allocated as follows: 18.3 cents to the Highway Trust Fund, and 0.1 cent to LUST [5].
Two legislative changes to the Highway Trust Fund resulted from the Transportation Equity Act for the 21st Century (TEA-21): no interest earnings on fund balances were to accrue beginning in 1999, and $8.2 billion in highway account cash balances were transferred to the General Fund. TEA-21 also revised the Internal Revenue Code to extend the scheduled expiration of the Highway Trust Fund excise taxes generally, from September 1999 to September 2005.
State and Local Gasoline Taxes
State and local motor fuel excise taxes generated $7.5 billion in the 3rd quarter of FY 2000. This amount exceeded taxes and fees raised from tobacco, alcohol, and driver's licenses [6]. State gasoline excise tax rates are listed in Table 2 [7]. Their gasoline excise tax rates (in 2000) ranged from 4 cents per gallon in Florida to 32 cents per gallon in Connecticut. Four States (California, Nevada, Oklahoma, and Tennessee) have provisions in their tax codes to offset any decrease in the Federal gasoline excise tax by a corresponding increase in the State gasoline excise tax, keeping the combined Federal-State gasoline excise tax constant [8].
Table 2.--State and Federal Gasoline Excise Tax Rates
for Fiscal Year 2000
Total tax Excise tax Additional tax
State (in cents) (in cents) (in cents)
(1) (2) (3)
Alabama(1) 18.0 16.0 2.0
Alaska 8.0 8.0
Arizona 18.0 18.0
Arkansas(3) 19.7 19.5 0.2
California 18.0 18.0
Colorado 22.0 22.0
Connecticut 32.0 32.0
Delaware 23.0 23.0
District of Columbia 20.0 20.0
Florida(5) 13.3 4.0 9.3
Georgia 7.5 7.5
Hawaii(1) 16.0 16.0
Idaho 26.0 25.0 1.0
Illinois(1) 19.3 19.0 3.0
Indiana 15.0 15.0
Iowa 20.0 20.0
Kansas 20.0 20.0
Kentucky 16.4 15.0 1.4
Louisiana 20.0 20.0
Maine 22.0 22.0
Maryland 23.5 23.5
Massachusetts 21.0 21.0
Michigan 19.0 19.0
Minnesota 20.0 20.0
Mississippi 18.4 18.0 0.4
Missouri 17.1 17.0 0.1
Montana 27.0 27.0
Nebraska 24.8 23.9 0.9
Nevada(5) 24.0 24.0
New Hampshire 18.7 18.0 0.7
New Jersey 10.5 10.5
New Mexico 18.0 17.0 1.0
New York 8.0 8.0
North Carolina 22.3 22.0 0.3
North Dakota 21.0 21.0
Ohio 22.0 22.0
Oklahoma 17.0 16.0 1.0
Oregon(5) 24.0 24.0
Pennsylvania 25.9 12.0 13.9
Rhode Island 29.0 28.0 1.0
South Carolina 16.0 16.0
South Dakota(5) 22.0 22.0
Tennessee(5) 21.4 20.0 1.4
Texas 20.0 20.0
Utah 24.8 24.5 0.3
Vermont 20.0 19.0 1.0
Virginia(5) 17.5 17.5
Washington 23.0 23.0
West Virginia 25.4 20.5 4.9
Wisconsin(4) 25.8 25.8
Wyoming 14.0 13.0 1.0
Federal 18.4 18.3 0.1
State Notes
(4)
Alabama(1) Inspection fee
Alaska
Arizona (2)
Arkansas(3) Environmental surcharge
California Sales tax applicable
Colorado
Connecticut
Delaware Plus 0.5 percent gross receipts tax(4)
District of Columbia
Florida(5) Sales tax added to excise(4)
Georgia Sales tax applicable (3 percent)
Hawaii(1) Sales tax applicable
Idaho Clean water tax(6)
Illinois(1) Sales tax applicable, environmental fee(2)
Indiana Sales tax applicable(2)
Iowa
Kansas (3)
Kentucky (2,7)
Louisiana
Maine
Maryland
Massachusetts (7)
Michigan Sales tax applicable
Minnesota
Mississippi Environmental fee
Missouri Inspection fee
Montana
Nebraska Petroleum fee(4)
Nevada(5)
New Hampshire Oil discharge cleanup fee
New Jersey Plus a 2.75-percent gross receipts tax
New Mexico Petroleum loading fee
New York Sales tax applicable(2)
North Carolina Inspection tax(7)
North Dakota
Ohio Plus 3 cents commercial
Oklahoma Environmental fee
Oregon(5)
Pennsylvania Oil franchise tax
Rhode Island LUST tax
South Carolina
South Dakota(5)
Tennessee(5) Petroleum tax and environmental fee
Texas
Utah
Vermont Petroleum cleanup fee(8)
Virginia(5) (8)
Washington 0.5-percent privilege tax
West Virginia Sales tax added to excise
Wisconsin(4) (4)
Wyoming LUST tax
Federal LUST tax(6)
(1) Tax rates do not include local option taxes. In AL, 1 to 3 cents;
HI, 8 to 11.5 cents; IL, 5 cents in Chicago and 6 cents in Cook
County (gasoline only).
(2) Carriers pay an additional surcharge equal to AZ, 8 cents; IL,
6.3 cents (gasoline), 6.0 cents (diesel); IN, 11 cents; KY, 2
percent (gasoline), 4.7 percent (diesel); and NY, 22.21 cents
(gasoline), 23.21 cents (diesel).
(3) The Arkansas gasoline and gasohol tax rate increased to 20.5
cents on July 1, 2000, and the diesel tax rate increased to 22.5
cents on April 1, 2000. The Kansas tax increased by 1 cent on July
1, 2000.
(4) Portion of the rate is adjustable based on maintenance costs,
sales volume, or cost of fuel to State government.
(5) Local taxes for gasoline and gasohol vary from 5.5 cents to 17
cents. Plus a 2.07-cent-per-gallon pollution tax. NV, 1.75 to 7.75
cents; OR, 1 to 2 cents; SD and TN, 1 cent; and VA, 2 percent.
(6) Tax rate is reduced by the percentage of ethanol used in blending
(reported rate assumes the maximum 10-percent ethanol).
(7) Tax rate is based on the average wholesale price and is adjusted
quarterly. The actual rates are: KY, 9 percent; MA, 19.1 percent;
and NC, 17.5 cents plus 7 percent.
(8) Large trucks pay a higher tax, VT-total 25 cents per gallon,
VA-additional 3.5 cents.
SOURCE: Compiled by Federation of Tax Administrators from various
sources.
Recent Trend of Gasoline Excise Tax Rates and Receipts
In Fiscal Year 2000, the gasoline excise tax provided the Federal Government with over $20 billion in revenue. Figure D shows receipts since 1960, in current dollars, along with the tax rate per gallon. Figure E shows both gasoline excise tax receipts and the rate per gallon in 1982-84 dollars. In Figure D, the tax rate coincides closely with the level of receipts. Figure E shows that revenues were $7 billion or higher in real terms through the 1960's until the late 1970's when they began to decrease, until rate increases starting in 1984 brought revenues up to their current levels.
[GRAPHS OMITTED]
Summary
The gasoline excise tax has provided a reliable source of revenue to Federal and State coffers throughout most of the 20th century. Federal receipts have reached the level of $20 billion per year since 1997. Most of these funds are distributed through the Highway Account and the Mass Transit Account of the Highway Trust Fund. State gasoline excise taxes generated $29 billion in 1999.
Notes and References
[1] Crawford, Finla G., Motor Fuel Taxation in the U.S.
[2] See U.S. Census Bureau web site: http:// www.census.gov/govs/statetax/99tax.txt.
[3] IRS Historical Fact Book: A Chronology 16461992.
[4] Crawford, op. cit.
[5] The Federal Excise Tax on Gasoline and the Highway Trust Fund: A Short History, Louis Talley, Congressional Research Service, March 29, 2000.
[6] See State and local finances on the Bureau of the Census web site: http://www.census.gov/ govs/www/qtax.html. Most of the data were gathered by mail canvass of appropriate State offices. In some instances, data were compiled by trained representatives of the Bureau of the Census from official State records.
[7] See Federation of Tax Administrators web site: http://www.fta.org. The tax rates listed are compiled by FTA from various sources.
[8] California Revenue and Taxation Code section 7351-7357, Nevada NRS 365.185, Oklahoma [sections] 68-500.4A, Tennessee 67-3-1306. Reproduced from Congressional Research Service web site: www.taxadmin.org/fta/rate/ Federal_State.html.
Brian Francis is an economist with the Special Studies Statistical Data Section. This article was prepared under the direction of Beth Kilss, Chief.
COPYRIGHT 2000 U.S. Government Printing Office
COPYRIGHT 2004 Gale Group
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