Time for a National Review of Gas Taxes

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Writing in a recent issue of Time magazine, neocon Andrew Sullivan, a senior editor at The New Republic, thinks that gas prices are too low. He maintains that “gas is woefully undertaxed in this country.” His solution: “Add a buck to the tax per gallon.”

After claiming that a tax on gasoline is good because it cuts the deficit, helps the environment, and keeps the government fiscally honest and accountable, Sullivan tries to justify a hike in the gas tax because of the war in Iraq:

Let me add one further reason, and it’s a simple one. We’re at war. So far, the Bush administration has refused to ask for a general sacrifice to pay for this effort. But that leads to a sense that we’re not all involved, that we do not all owe the troops our support. More important: the war is about the Middle East. A long-term strategy to protect us from constant involvement in that region would include greater energy independence. A gas tax both helps pay for our current struggle and helps us avoid future ones. Why not therefore a war-time gas tax of a dollar a gallon? If we do not owe it to our fellow citizens, to the environment, to less traffic, to greater fuel efficiency, can we at least owe it to the troops? Or is that minimal level of personal sacrifice too much to ask of ourselves?

That Andrew Sullivan would advocate a higher gas tax comes as no surprise, but in his response to Mr. Sullivan, Ramesh Ponnuru, writing at National Review Online says that he thinks “Sullivan’s arguments are mostly wrong. But they’re not entirely wrong, and there may be circumstances under which a gas-tax hike would be a good idea.” Like Mr. Sullivan, Mr. Ponnuru cites the war in Iraq as the “circumstances” under which an increase in the gas tax would be a good idea. He believes that “a higher gas tax would indeed further the war on terrorism.”

War makes for strange bedfellows.

But are gas prices too low? War or no war, do we need a higher gas tax? As I have pointed out elsewhere, we are already taxed to death.

According to the American Petroleum Institute, the average price of a gallon of regular gas is currently about $1.88 per gallon. I doubt that many Americans would say that gas prices were too low.

The federal excise tax on gasoline has been 18.4 cents per gallon since 1993. On top of this, each of the fifty states also levies its own gas tax. The tax ranges from a low of 8 cents per gallon in Alaska to a high of 16 cents per gallon in Hawaii. But this is only the beginning, for these figures do not take into account local taxes and “other” taxes placed on gasoline. In the states of Alabama, California, Florida, Hawaii, Illinois, Nevada, New York, and Virginia, counties also impose their own taxes on gasoline. The states of California, Georgia, Hawaii, Indiana, Illinois, Michigan, and New York have a state sales tax on gasoline. Some of these states even tax the taxes on gasoline. New York, Michigan, and Georgia apply their sales tax to the federal excise tax. California applies its sales tax to both the federal and state excise taxes. Some states levy additional taxes on gasoline under the guise of environmental fees, inspection fees, and the support of various “funds.” There is even an additional “seawall tax” of 3 cents per gallon in several counties in Mississippi.

Estimates of the total current gasoline taxes (in cents per gallon) by state, including all federal, state, and local taxes, are as follows:

State
Total Taxes

Alabama
39.6

Alaska
26.4

Arizona
37.4

Arkansas
39.9

California
50.8

Colorado
40.4

Connecticut
48.5

Delaware
41.4

Dist. of Columbia
38.4

Florida
48.8

Georgia
31.1

Hawaii
54.7

Idaho

43.4

Illinois
45.1

Indiana
41.7

Iowa
39.7

Kansas
43.4

Kentucky
34.8

Louisiana
38.4

Maine
44.5

Maryland
41.9

Massachusetts
41.9

Michigan
45.6

Minnesota
40.4

Mississippi
37.2

Missouri
35.4

Montana
46.2

Nebraska
44.1

Nevada
51.6

New Hampshire
39.0

New Jersey
32.9

New Mexico
36.4

New York
51.4

North Carolina
43.0

North Dakota
39.4

Ohio
44.4

Oklahoma
35.4

Oregon
42.4

Pennsylvania
45.7

Rhode Island
49.4

South Carolina
35.2

South Dakota
42.4

Tennessee
39.8

Texas
38.4

Utah
42.9

Vermont
38.4

Virginia
37.4

Washington
46.4

West Virginia
43.8

Wisconsin
49.9

Wyoming
32.4

Average
42.7

Source: American Petroleum Institute

The average price of a gallon of gasoline, exclusive of taxes, is about $1.45. This means that gas taxes as a percentage of the product price amount to about 29.5 percent. Imagine paying a tax of 29.5 percent on everything you purchase. The American public would be outraged. So why are they not outraged about the taxes on gasoline? Contrary to Andrew Sullivan, the gas tax is a hidden tax. Not one American out of a hundred could tell you what the federal gas tax is on a gallon of gasoline.

Taxes on diesel fuel, at the federal level, and in most states, are even higher. And since the above data was obtained, Wisconsin increased its state gas tax by .6 cents per gallon.

State and federal gas taxes bring in more than $50 billion annually. We are indeed taxed to death, and, thanks to the estate tax, another favorite of Andrew Sullivan, we are taxed at death.

For more on the evils of the gas tax, see Murray Rothbard’s classic article, “That Gasoline Tax.”

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