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Pain At The Pump: State Gas Taxes

I was speeding through my fourth state in six hours, marveling at the major differences in gas prices along the way. As I drove south along I-77 from Ohio to North Carolina, I’d seen gas for as low as $3.42 in Wytheville, Virginia, and as high as $3.89 along the West Virginia Turnpike. Were the gas station owners in West Virginia trying to bilk me out of my hard earned cash? Were they simply nicer in Virginia? What could explain the nearly 50-cent discrepancy in the price of a gallon of regular unleaded from state to state?

It wasn’t until I reached a service station in my home state – North Carolina – before a simple sign on the gas pump gave me the answer I’d been looking for.

State Gas Taxes

Uncle Sam charges you 18.4-cents in taxes on every gallon you pump. This tax remains the same whether you’re driving through the California desert or along Michigan Avenue in Chicago. (Side note: the federal government also charges a tax on diesel gas – at 24.4-cents a gallon, this higher rate explains the higher price of diesel at stations nationwide.)

But when you cross state lines, you become subject to each state’s varying gas tax. The gas tax sign on the pump in North Carolina outlined the gas taxes for states across the southeastern United States. They are, from highest to lowest:

  • North Carolina: 57.5 cents/gallon
  • West Virginia: 50.6 cents/gallon
  • Georgia: 49.9 cents/gallon
  • Kentucky: 40.9 cents/gallon
  • Tennessee: 39.8 cents/gallon
  • Alabama: 39.3 cents/gallon
  • Virginia: 38.6 cents/gallon
  • South Carolina: 35.2 cents/gallon

(Don’t see your state listed here? Click here for a state by state list of gas taxes.)

Your Tax Dollars At Work

If you’ve ever spent a mind-numbing amount of time driving two miles an hour through an interstate construction zone, then you’ve probably had a chance to carefully observe the posted signs that read “Your tax dollars at work.” It’s true: while the exact amount varies from state to state, a large proportion of the funds collected through your state’s gas tax does go to pay for road work and other transportation infrastructure improvements. But that’s not all it does. In Texas, a small percentage of the state’s 20 cents/gallon gas tax goes to public education. In North Carolina, and many other states across the nation, the gas tax not only pays for repairs to state-owned roads, but to roads owned and maintained by city and other local governments (side note: I drive on North Carolina roads every day. I don’t understand how we have one of the highest gas taxes in the nation, yet our roads are still in horrible condition. If these are my tax dollars at work, then they need to work harder). Other states use funds generated by their gas tax to support Medicaid programs.

And The Rest Of The Money…?

Between North Carolina’s 57.5 cent state gas tax and the federal 18.4 cent tax, I’m paying 75.9 cents/gallon in taxes alone. But with today’s national average for the price of a gallon of regular unleaded above $3.80 and climbing, what accounts for the additional $3/gallon?

While Republicans will tell you that Democrats to blame for rising gas prices, and Democrats will tell you Republicans are at fault, Mostly market conditions – everything from the price of crude oil, to refinery shutdowns in the Gulf, to the international tension caused by Iran in the Straits of Hormuz.

What about the gas station owners? While they are the ones posting the prices you see on the marquee, they play a minimal role in determining the price you pay at the pump. For every gallon sold, a portion of the price goes to pay the refiners, the companies that transport the gas (both from overseas to the refinery, and from the refinery to your local gas station), the oil companies themselves, and all those taxes. And those station owners? The U.S. Energy Information Administration estimates they make between 7 and 10 cents on every gallon they sell – and that’s before they pay their employees.

How High Is Too High

Even with gas prices reaching all-time highs, state governments are still considering increasing their gas taxes. In Maryland, where the state gas tax hasn’t risen in nearly two decades, the Governor is pushing for a six percent increase over several years; Iowa legislators are also increasing raising their state’s gas tax by eight to ten cents a gallon. Michigan and Arkansas are also considering similar increases.

Readers, do you think states should cut back on their gas taxes – or is it a good way to raise revenues?

Article publié pour la première fois le 17/12/2012