Vital Adjustments since January 2024

• Washington elevated its fuel tax by 6.22 cpg, growing its rank from 4^th to three^rd.
• Missouri elevated its fuel tax by 5.02 cpg, lowering its rank 9 positions to twenty-eight^th.
• Kentucky lowered its fuel tax by 3.70 cpg, growing its rank 9 positions to 33^rd.
• Minnesota elevated its fuel tax by 3.30 cpg, lowering its rank eight positions to 22^nd.
• Mississippi elevated its fuel tax by 3.00 cpg, lowering its rank six positions to 43^rd.
• New York lowered its fuel tax by 0.81 cpg, lowering its rank by 4 positions to 29^th.

Many states don’t permit localities to levy their very own taxes on gasoline, however some states permit native taxes that impose a big extra value to drivers. Native taxes in Hawaii, as an example, are greater than the state’s excise taxAn excise tax is a tax imposed on a selected good or exercise. Excise taxes are generally levied on cigarettes, alcoholic drinks, soda, gasoline, insurance coverage premiums, amusement actions, and betting, and sometimes make up a comparatively small and risky portion of state and native and, to a lesser extent, federal tax collections., as much as an extra 24 cpg in Maui. Nevada additionally has important local-level taxes and mechanically growing levies from the Regional Transportation Fee’s Gasoline Income Indexing. These whole to 36 cpg in Clark County and 62 cpg in Washoe County.

Just a few states additionally levy a tax as a proportion of gross receipts on the sale of fuels, which is troublesome to transform right into a per gallon fee. The best of those is in Connecticut, the place the Petroleum Merchandise Gross Earnings Tax is 8.1 % on wholesalers. The Connecticut Division of Income estimates the speed as utilized to diesel gasoline to be about 19.9 cpg, however doesn’t estimate the per gallon fee for gasoline.

A number of states additionally impose extra burdens on fuel costs through environmental packages and rules like carbon taxes. Somewhat than a consumer charge to fund the roads, these insurance policies are designed to form conduct by discouraging the consumption of services or products that generate emissions like motor gasoline.

Figuring out the marginal influence of carbon taxes and environmental packages on the per gallon value of fuel is troublesome. Estimates fluctuate considerably. State environmental businesses are inclined to estimate the influence of their packages to be a lot decrease than most financial analyses, as an example. Some environmental packages like cap-and-trade programs have fluctuating costs, and thus a fluctuating influence on fuel costs.

Together with the influence of state environmental packages on whole fuel tax burden widens the vary of fuel taxes throughout the nation. Environmental packages have the biggest impact in California, the place the Legislative Analyst’s Workplace estimates the cap-and-trade program will increase fuel costs by about 23 cpg. The state’s Low Carbon Gasoline Customary was amended efficient July 1, 2025, to be extra stringent. The California Air Sources Board had beforehand anticipated the gasoline commonplace to extend fuel costs by 47 cpg in 2025. Extra lately, the amendments have been estimated to extend fuel costs by 5 to eight cpg, based mostly on actions after the amendments had been introduced however earlier than they took impact. The California Vitality Fee has estimated that the state’s environmental packages add 29 to 54 cpg to fuel costs.

Equally, Washington’s Local weather Dedication Act was initially anticipated to lift fuel costs by 44 cpg at carbon costs barely lower than the costs bid on the most up-to-date public sale, however the Division of Ecology now claims the influence on costs was solely 4 cpg from the Clear Gasoline Customary and 4 to 13 cpg from the cap-and-invest program.

The Oregon Division of Environmental High quality estimates its Clear Fuels Program elevated fuel costs by about 7.5 cpg in 2024. Oregon’s Local weather Safety Program started in 2025, however the state has not estimated its impact on fuel costs.

Whether or not these environmental taxes are applied as a tax on carbon emissions, gasoline commonplace mandates, a cap-and-trade system, or different program, these insurance policies improve the worth of gasoline.

The clearest technique to see the influence of state coverage on gasoline costs could also be to look at gasoline costs. Taxes and environmental coverage are essential components, in fact, however Alaska, Hawaii, and the West Coast states have lowered refining capability and better transportation prices than the remainder of the nation. Whereas figuring out the precise influence on costs is troublesome, it appears clear that the states’ environmental packages impose a big burden on the costs drivers pay on the pump.

The fuel tax is supposed to function a consumer charge for the roads, however the efficacy of per gallon excise taxes on fuels continues to deteriorate. As electrical autos, which don’t pay into the fuel tax, grow to be more and more distinguished, automobile gasoline efficiencies steadily enhance, and inflationInflation is when the overall value of products and companies will increase throughout the economic system, decreasing the buying energy of a foreign money and the worth of sure property. The identical paycheck covers much less items, companies, and payments. It is typically known as a “hidden tax,” because it leaves taxpayers much less well-off on account of greater prices and “bracket creep,” whereas growing the federal government’s spendin continues to erode the true worth of revenues from unindexed charges, the fuel tax turns into a worse proxy for the worth of roads.

Dealing with this actuality, most states have begun to cost drivers of electrical autos an extra charge to account for the income misplaced from the fuel tax. With most states nonetheless unable to totally fund their transportation system with transportation taxes and charges, many are contemplating changing their fuel taxes fully with automobile miles traveled (VMT) taxes as a substitute, charging drivers per mile pushed slightly than per gallon of fuel consumed. If correctly calibrated, this might get rid of the non-neutral remedy of autos with totally different gasoline efficiencies, align roadway revenues to expenditures, and be sure that drivers are those paying for the roads.