The 7 States With the Lowest Gasoline Taxes

The price of gasoline is constantly on people's minds. The prices you see on those gas-station signs everywhere you drive are tough enough to swallow, but what you may not know is the extent to which gas taxes contribute to those prices.

The federal tax is $0.184 per gallon, and states add their own taxes to bring the average cost up to $0.303 per gallon. So which states give you the biggest break? Let's take a look at who has the lowest gas taxes.

Rank

State

State Gasoline Tax Per Gallon

Total Gasoline Tax Per Gallon

1

Alaska

$0.080

$0.264

2

Wyoming

$0.140

$0.324

3

New Jersey

$0.145

$0.329

4

South Carolina

$0.168

$0.352

5

Oklahoma

$0.170

$0.354

6

Missouri

$0.173

$0.357

7

New Hampshire

$0.196

$0.380

Source: American Petroleum Institute.

As you'd expect, higher taxes correlate with higher gasoline prices and lower taxes with lower prices.

Source: GasBuddy.com.

Governments use gas taxes to maintain and upgrade roads and transportation infrastructure, but there are a few problems. For one, these taxes generally aren't linked to inflation. The federal gas tax has been the same since 1993, so the revenue pays for less and less. Second, as cars grow more efficient and use less gasoline, tax revenue will decline, further challenging transportation infrastructure funding. Just ask Ford (NYSE: F  ) and Toyota (NYSE: TM  ) how their hybrid vehicle sales are doing. In Ford's latest release, the company said it sold a record number of hybrids. Not to be outdone, Toyota has reportedly sold more than 5 million hybrids over the past six years.

As we work through our list of the states with the lowest tax burden at the pump, note that the data is current as of April 3 but that some states have passed laws that will either decrease (Virginia) or increase (Connecticut, Maryland, Wyoming, New Hampshire) their taxes going forward. Those changes aren't reflected in the current numbers.

1. Alaska
Alaska has an $0.08-per-gallon excise tax on gasoline, which, combined with the $0.184 federal tax, adds up to $0.264 per gallon. Even so, it has some of the highest gas prices in the country, with an average cost of $3.98 per gallon, according to AAA. That puts its prices on par with California, which has the highest prices and taxes in the country. The high prices make sense, since distribution costs more than for the continental U.S., which benefits from a robust pipeline network.

Alaskans do benefit, however, in other ways from the state's oil production. If you can put up with the isolation from the rest of the country and the harsh winters, there's a lot to like about Alaska, including no income tax, low property taxes, pristine wilderness, and even a yearly dividend check. Residents get paid each year from the Alaska Permanent Dividend Fund, which distributes a portion of the royalties collected from mineral production. The dividend payment in 2012 was $878. 

2. Wyoming
Wyoming currently has the second lowest gasoline tax at $0.14, per gallon and a current average gas price of $3.34, according to AAA. However, the state won't be on this list for long, as it passed a bill in February to raise the tax by $0.10 a gallon as of July 1. The increased revenue will mainly go to fund state highways, but smaller roads will also see some of the money.

3. New Jersey
New Jersey comes in at $0.145 per gallon and a current average gas price of $3.31. Along with Oregon, this state prohibits drivers from pumping their own gas. The law has been on the books since 1949 and has survived multiple attempts over the years to repeal it.

4. South Carolina
South Carolina's tax is $0.168, and its current average price is $3.277. That probably won't last much longer, though, as the state faces a massive $29 billion shortfall for its transportation infrastructure needs over the next 20 years. State lawmakers have been pushing bills to increase  the gasoline tax, though they've made little progress so far.

5. Oklahoma
Oklahoma's tax is $0.17 and its average gas price is $3.305. It's been 26 years since Oklahoma increased its tax, the second longest of any state, according to the Institute on Taxation and Economic Policy.

6. Missouri
Missouri taxes gas at $0.173 per gallon and has a current average price of $3.332. A proposed $0.01 increase to the state's sales tax is moving through the state legislature to pay for transportation projects, and it it passes, it will still require voter approval. It's expected to raise $8 billion over the next 10 years. Lawmakers estimated that to raise a similar amount of funds, the gas tax would have to increase by $0.20 to $0.25 per gallon.

7. New Hampshire
New Hampshire rounds out our list at $0.196 and an average $3.445, but it will soon fall out of the top seven. In March, the state passed a $0.12-per-gallon tax increase that will be phased in over three years in equal $0.04 increments, starting this July 1.

Foolish bottom line
We all feel the pinch at the pump, but don't expect prices to drop anytime soon. Gas taxes will probably head higher all over the country over the next few years as the U.S. struggles to pay to upgrade the country's declining infrastructure. Get ready to crack open that wallet a little wider.

If you're on the lookout for some currently intriguing energy plays, check out The Motley Fool's "3 Stocks for $100 Oil." For free access to this special report, simply click here now.


Read/Post Comments (13) | Recommend This Article (10)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 21, 2013, at 10:10 AM, altonlee wrote:

    Granted there has not been an in crease in the per gallon tax and autos do get better mileage, but the number of vehicles being driven has tripled or more. So the amount collected for road use has also gone up. The problem is that congress has moved the taxes collected on fuel to the general fund. So the money is spent on other things rather than roads.

    Google the amount of fuel bought in a single day and multiply it by the tax both fed and state then you can how much the gov collects each day.

  • Report this Comment On April 21, 2013, at 10:19 AM, Skytresses wrote:

    so how does this equate to the $2 to $3 more we have to pay at the pump like everyone claims?

  • Report this Comment On April 21, 2013, at 11:40 AM, super45 wrote:

    Hello

  • Report this Comment On April 21, 2013, at 11:50 AM, super45 wrote:

    In the Welliston Basin better know as Bakken in N. Dakota they estimate the oil reserves to be near 503 billion barrels of oil. Even if you only got 10% of that, it would generate 5.3 Trillion Dollars for the USA. That is 8 times more than Saudia Arabia, 18 more than Iraq, 21 times more than Kuwait, 22 times more than Iran, and 500 times more than Yemen. Most of our politicians are not aware of this. Makes you wonder why we haven't been pumping this oil out. Do you suppose OPEC has anything to do with it?

  • Report this Comment On April 21, 2013, at 12:15 PM, super45 wrote:

    I did not think you would censor the last comment that I posted. It is the truth. Why have this post if you are not going to allow freedom of thought and comment.

  • Report this Comment On April 21, 2013, at 12:16 PM, super45 wrote:

    OK, I see my comment. I apologize.

  • Report this Comment On April 21, 2013, at 1:02 PM, SpaceFetus wrote:

    super45, the reason we don't pump it out has to do with national security. I know, I know... but this isn't tinfoil hat time. Our nation's defenses rely on gasoline, diesel fuel and jet fuel to keep our nation safe. In the event of an attack on the US, we would need those products to fight invaders. If we pump out all of the crude oil within our national borders, we would be totally dependent on foreign imports to protect our citizens. These imports could be blockaded leaving us defenseless. So, we use foreign oil while it lasts so we have our own reserves here if needed.

  • Report this Comment On April 21, 2013, at 3:22 PM, DiverMike wrote:

    I live less than five miles from 7 refineries in L.A./Long Beach CA. Pay about $4.00 a gallon (to $4.35 for premium). Last weekend in the middle of the Arizona Dessert I paid only $3.65. On the California side of the border, I'd been paying about $4.15. That tax isn't going for road maintenance, it is going to fund Caltrans workers outrageous retirement benefits!

  • Report this Comment On April 21, 2013, at 3:58 PM, boogbear wrote:

    I live in alaska 5 miles from a refinery lowest gas tax in US and were paying between 4./4.10 so somebody please explain.............and that was yesterday at the pumps.

  • Report this Comment On April 21, 2013, at 4:33 PM, rjcoop1 wrote:

    The government makes a fortune off gasoline taxes then the Libs turn around and demonize the producers for making too much money. The reality is the Feds get more per gallon profit than the oil companies, does the media explain this? No. Also check where taxes and prices highest. Calif and Northeast. Liberal enclaves.

  • Report this Comment On April 22, 2013, at 11:59 AM, lwazny wrote:

    rjcoop1 You need to do some homework before you comment. The Federal Government directs the 18 cent federal gas tax to the Highway Trust Fund where it reimburses states for expenditures on Federal eligible highway projects. Currently more is going out of the Highway Trust Fund than money coming in via the tax since it hasn't been raised for almost 20 years. Also cars are more fuel efficient and using less fuel so less tax than just 5 years ago. Also the growth in Vehicle Miles of Travel (VMT) has flattened so the comment about all those additional vehicles doesn't hold water....

  • Report this Comment On April 22, 2013, at 12:04 PM, lwazny wrote:

    In Iowa the state gas tax has remained constant for 25 years so the available funds to repair lower volume state roads, county and city roads has lost buying power due to inflation. Fewer repairs, rougher driving experience and higher more frequent private cost to replace shocks, struts and tires.

  • Report this Comment On April 22, 2013, at 12:12 PM, lwazny wrote:

    Altonlee The opposite is true the...Congress rather than raise the federal gas tax has chosen to backfill the Highway Trust Fund with general fund revenues to make up for the deficits in the Trust Fund (about $4 Billion to now approaching $8 Billion per year). If you need confirmation of this go to the FHWA website US Department of Transportation.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2375188, ~/Articles/ArticleHandler.aspx, 11/27/2014 10:29:26 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 day ago Sponsored by:
DOW 17,827.75 12.81 0.07%
S&P 500 2,072.83 5.80 0.28%
NASD 4,787.32 0.00 0.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

11/26/2014 4:00 PM
F $15.61 Down -0.07 -0.45%
Ford CAPS Rating: ****
TM $121.70 Down -0.11 -0.09%
Toyota Motor Corp… CAPS Rating: ***

Advertisement