What Does Gas Tax Pay for

However, gasoline taxes levied at the state and federal levels are increasingly lagging behind what is needed to maintain and develop the country`s roads. The Highway Trust Fund has had to take money from the U.S. Treasury`s general fund since 2008. It doesn`t seem much related to a $1 trillion spending proposal. What does the federal government do with the money it borrows through gas taxes? What are we talking about? Alabama has particularly robust laws that describe gas tax revenues that can be used at the national, regional, and local levels. For example, local governments can use their share of gasoline tax revenues to fund the removal of facilities as part of road maintenance, but they are not allowed to use gasoline tax revenues to purchase herbicides. To calculate the diversion rate, we first look at which state account or funds MFT revenues are allocated to in each state. States like Georgia and Illinois have special accounts for MFT revenue, which means that all expenses in the government account or fund come from MFT revenues. Other states, such as Alabama or Massachusetts, place MFT`s income in a special transportation account or, like Alaska, in a general fund account with various other sources of income. At the same time, Delaware and New Hampshire do not derive any of their respective revenues, and Pennsylvania derives only 3.1% of its revenues, even though it has a fairly robust public transportation system in Philadelphia (although Pennsylvania redirects revenues from turnpikes to public transit systems). The state excise tax also pays for other programs and costs. Not counted above or shown in the figure are an additional $390 million in government gasoline tax revenues.

Most of this revenue comes from gasoline purchases for off-road vehicles, farm vehicles, boats and airplanes. The state does not spend these funds on highways and road programs because these vehicles do not use this infrastructure. Instead, the crown spends these revenues on the General Fund, State Parks (for general parking purposes, off-road vehicle programs, and boat programs), agricultural programs, and aviation programs. In addition, a small portion of the government`s gasoline tax revenue covers the costs associated with collecting and distributing revenues. Federal excise duty (18.4 cents per gallon). In addition to the state`s excise tax, California drivers pay a federal excise tax on gasoline. This tax works in the same way as the state excise tax – that is, the tax is not paid directly by drivers, although it increases the prices of gasoline they pay at the pump. The federal excise duty is not adjusted annually for inflation. Connecticut, for example, spends 40 percent of its gas tax revenues, equivalent to $610 million, on debt service in transportation obligations. While this list does not count debt service as a diversion, nearly a quarter of all transportation bond revenues in fiscal 2019 were funded by public transit.

As a result, Connecticut may use some of the gas tax revenue to fund transit obligations that have little to do with roads or highways. States could pass laws or constitutional amendments that prevent the diversion of gas tax revenues from the outset. The Georgian Constitution, for example, restricts the use of fuel tax revenues on roads and bridges for construction, maintenance and financing. The most effective way, as Georgia has shown, is to deposit all gas tax revenues into one`s own account and limit the use of that account on roads and highways. States can also request laws or a constitutional amendment to designate gasoline tax revenues as assigned revenues, regardless of the account in which the revenues are deposited. Most states allocate a small portion of their MFT revenues to cover the administrative costs of collecting MFT or to reimburse the use of agricultural or recreational fuels, none of which are considered diversion. Gasoline taxes can generally be divided into two components: an excise tax on gasoline and an additional fee, both of which are collected at the gallon rate. Most of the time, a large majority of the gasoline tax rate consists of an excise duty per gallon, which is the usual label for a gasoline tax. Additional fees per gallon are often used to cover the cost of oil tank inspections or specially designated funds, whether in terms of agriculture, environment or transportation. Today, an Oregon driver who allegedly paid one cent per gallon in 1919 pays 36.8 cents per gallon in the state`s gasoline tax and 18.4 cents per gallon in the federal gas tax. One penny in 1919 is equivalent to 15 cents in 2020 with the same purchasing power. Today`s vehicles are about 17.6% more fuel efficient than those of the 1920s, although today`s vehicles are about 66.9% more fuel efficient compared to 1960 vehicles (comparing the average fuel consumption of 24.7 miles per gallon today, with the fuel consumption of the Ford Model T at 21 miles per gallon and the average fuel consumption of 14.8 miles per gallon in 1960).

Based solely on inflation and increased energy efficiency, that one-cent tax in 1919 would be 17.6 cents today. Currently, the state`s gasoline taxes range from 14.32 cents per gallon in Alaska to 62.05 cents per gallon in California, excluding the federal gasoline tax of 18.4 cents per gallon. The 10 states derive the largest percentage of their gasoline taxes: New York diverts 37.5% of its gasoline tax revenues, Rhode Island diverts 37.1%, New Jersey and Michigan divert 33.9%, Maryland diverts 32.5%, Connecticut 27%, Texas 24%, Massachusetts 23.9%, Florida 13.6% and Vermont 13.2%. Congressional Research Service, “Funding and Funding for Highways and Public Transportation,” page 10. Accessed April 5, 2021. Biden`s proposal goes beyond travel expenses. He called for a corporate tax increase to fund infrastructure proposals, which Republicans do not support. Property tax. In 2021-2022, this portion of the excise tax is equivalent to 19.4 cents per gallon and is expected to bring in $2.6 billion. .

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