Filling up your tank is pricey, and the total cost is more than just the price of gas alone. Every time you fill up, a federal gas tax and a state tax gets tacked on to each gallon of gas you put into your car.
With the price of gas skyrocketing of late, in large part because of the war Donald Trump started with Iran, the president has floated the idea of suspending the federal gas tax altogether. But how much would that really save consumers?
What is the federal gas tax?
It is an “excise tax that’s paid on any fuel that’s sold in the US.,” said Intuit TurboTax. Initially, the tax “was meant to be temporary when President Herbert Hoover signed it into law in 1932 to help pay for national defense spending,” said The New York Times. “But persistent budget deficits kept it in place, and the money it raises is used for road maintenance through the Highway Trust Fund.”
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How much is the federal gas tax?
The current federal gas tax costs drivers 18.4 cents, a charge that applies per gallon of gas. For those filling up with diesel fuel, the cost is a bit higher, at 24.4 cents per gallon.
Keep in mind, that is just the federal gas tax. All states and the District of Columbia also tax motor fuels, with per-gallon gas tax rates ranging “from 8.95 cents in Alaska to 62.9 cents in California,” said the Tax Policy Center. Additionally, “10 states also levy a general sales tax or gross receipts tax on purchases of motor fuel,” which can further increase the overall cost of filling up.
How much could drivers save if the gas tax is suspended?
Will nixing those cents on the gallon actually allow drivers to save on gas? Yes, but only minimally. If the federal gas tax were to drop by the full 18.4 cents, that would mean “for a 15-gallon tank, that’s $2.70 saved,” said CBS News. “When filled up weekly, that’s about $10.80 a month.”
However, “experts say the price drop would be less than 18 cents,” said CBS News. Some of that gas tax would instead “end up staying with the gas station itself, maybe the producers or anyone else in the supply side of the gas market,” added the outlet, citing tax policy expert Adam Hoffer.
Gas taxes ultimately make up just a small portion of the amount consumers are paying at the pump. Even with the suspension of both federal and state gas taxes, “prices would still average 35% more per gallon than they were at the start of the Iran war,” said NBC News. Since the war began in late February, “prices nationwide are up more than 50%.”
