Gas Tax Rate at Historic Lows in 10 States

AASHTO Journal, 16 May 2014

The purchasing power of America’s gas tax has declined to historically low levels in several states, according to a report released last week by the Institute on Taxation and Economic Policy.
The report identifies Alabama, Alaska, Delaware, Idaho, Iowa, Nebraska, New Jersey, South Carolina, Utah, and Virginia as states where gas tax rates are currently at an all-time low, when adjusted for inflation. ​


Through a chart, the report shows these states’ historical average gas tax rate compared to the 2014 gas tax rate (in cents per gallon, adjusted for inflation). This inflation adjustment was factored in for a comparison of tax rates over time, the report said. For example, while a 2 cent gas tax levied by Delaware in 1924 is low for today’s standards, “in the context of the 1924 economy it was actually higher than the tax rate Delaware levies today.” A 2 cent tax in 1924 was roughly equivalent to a 27.8 cent tax today, according to the report.

According to the chart, for example, Virginia holds a 2014 gas tax rate of 11.1 cents, 35 cents below the historical average of 46.1 cents. South Carolina is close to that rate, with a 2014 gas tax rate of 16, or 33.4 cents per gallon less than the historical average of 49.4. Rounding out the top three of biggest differences is Alabama, which holds a 2014 gas tax rate of 16, or 29.8 cents below the 45.8 cent historical average. The 2014 gas tax rates compared to historical averages for the remaining top 10 are as follows: Idaho (-22.4 cents); Nebraska (-20.5 cents); Iowa (-18.9 cents); Alaska (-17.4 cents); Delaware (-17.3 cents); New Jersey (-17.3 cents); and Utah (-17).

While the gas tax has remained stagnant in these states for some time, some are finding other ways to pay for transportation infrastructure. Last year, for example, then-Governor Bob McDonnell signed a bill that replaced the state gas tax with a 3.5 percent wholesale tax on fuel and a 6 percent tax on diesel fuel (see related AASHTO Journal story here).

“Raising the gas tax in these states could reverse the long-running decline in their value brought about by inflation. In many cases, however, the tax rate has been allowed to stagnate for so long that a significant increase is needed just to restore the tax to its previous value. Even if South Carolina tripled its 16 cent gas tax, for example, the tax rate would still fall below its 93-year average of 49.4 cents per gallon,” according to the report. “Failing to raise the gas tax in these states guarantees that the unprecedented decline in the tax’s purchasing power will continue. Unless lawmakers act, this decline is likely to be a major barrier to adequately funding infrastructure in the years ahead.”

The report is available here.

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