In the U.S. Energy Information Administration’s (EIA) latest update of its data on state gasoline and diesel fuel taxes, the simple average of taxes and fees on gasoline levied by the states and the District of Columbia at the beginning of 2021 was 30 cents per gallon (¢/gal). These taxes and fees range from a low of 8.95¢/gal in Alaska to a high of 58.7¢/gal in Pennsylvania. Gasoline buyers in the United States pay these taxes in addition to the federal tax of 18.4¢/gal, which has remained unchanged since 1993.
Federal, state, and local governments levy a variety of taxes and fees on transportation fuels. Although these charges often include relatively small fees that provide revenue for environmental protection and other dedicated funds, most governments use fuel tax revenues to build and maintain transportation infrastructure.
In its Gasoline and Diesel Fuel Update, EIA estimates that federal and state taxes accounted for 19% of the average retail gasoline price as of February 2021, or about 48¢ of the $2.50/gal monthly retail average gasoline price. Taxes made up a larger share than other cost components such as refining (13%) and distribution and marketing (12%) but much less than the largest price component, the price of crude oil (56%).
EIA compiles state-level taxes and fees for motor gasoline and diesel as of January 1 and July 1 of each year and publishes these values in its Petroleum Marketing Monthly. In the most recent update, gasoline taxes remained unchanged in 30 states, increased in 13 states, and decreased in 8 states since January 1, 2020.
New Jersey’s state gasoline tax increased by 9.3¢/gal starting October 1, 2020—the largest increase among states last year. The increase was required to ensure compliance with a 2016 state law that requires sufficient funding for the state’s Transportation Trust Fund, which experienced a shortfall because of less vehicle travel in 2020.
Virginia’s state gasoline tax increased by 5.0¢/gal on July 1, 2020, and is set to increase by another 5.0¢/gal on July 1, 2021. Starting in mid-2022, Virginia’s state gasoline tax will be indexed to inflation. In a number of other states, a portion of the total fuel taxes consumers pay is levied as a sales/use tax that fluctuates based on retail prices. As gasoline prices fell in 2020, those variable tax rates also declined in states such as Michigan, Illinois, and Indiana. Coupled with reduced sales of motor fuels, state revenue collections that are used to fund public transportation projects have also fallen.