The price of gasoline is something nearly every American is intimately familiar with, and in recent years, pain at the pump has made many people cut back on their spending on other things. Yet even as drivers finally get a break on gas prices, some state governments still collect a substantial amount of tax revenue when you gas up your vehicle.
To show you which states are the biggest offenders with their gas taxes, we took a look at the latest figures from the American Petroleum Institute. When you add up federal, state, and local taxes, each of these states adds at least $0.55 per gallon to what you pay at the pump. Let's take a closer look at each of these states to try to understand the reason behind their high levies.
The state of Washington has average gasoline taxes of $0.5590 per gallon, ranking seventh. Washington's entire levy comes in the form of a $0.3750 per gallon excise tax that applies both to gasoline and diesel fuel purchases, with the remainder going to pay the $0.1840 federal excise tax on gasoline. Washington has no state income tax, forcing it to rely more on gas tax and other revenue to finance its government.
6. North Carolina
North Carolina has a slightly higher gas tax of $0.5615 per gallon, according to the API, with the same $0.3750 per gallon excise tax plus an additional quarter-cent inspection tax. The excise tax is based on a flat rate plus a percentage of wholesale gas prices over the preceding six months, though, making it variable and subject to reduction below the maximum $0.3750 amount. Based on current prices, that could have taken the tax below the $0.30 per gallon mark, so just this past week, lawmakers agreed to reduce the excise tax to $0.36 per gallon for the rest of 2015, with further cuts of a penny coming in January 2016 and July 2016. That will provide some relief but still leave North Carolina near the higher end of the gas tax regime generally.
Connecticut is notorious for high taxes generally, and its $0.6162 per gallon gas tax puts it in the top five of all states. Its taxes come from a $0.25 per gallon excise tax, as well as other levies that include petroleum gross receipts tax collected on wholesale gasoline sellers. The 8.1% amount is capped at $3 per gallon, but falling prices will likely bring these taxes down in the future.
Hawaii charges motorists $0.6340 per gallon in gas taxes, and combined with its remote location, gas taxes contribute to some of the highest gas costs in the nation for residents. Hawaii has a $0.17 per gallon excise tax, but additional taxes at the county level add another $0.28 per gallon to the total. Hawaii also charges an environmental response tax designed to encourage energy alternatives and fund energy and food security initiatives.
3. New York
The state of New York adds $0.6349 to the cost of every gallon of gasoline in taxes. A small portion of the levy comes from an $0.08 per gallon excise tax, but petroleum business taxes account for another $0.1780 per gallon in tax revenue. Both the state and local counties also charge sales taxes that are based either on percentages or fixed costs per gallon, bringing the total in state taxes to $0.4509 per gallon.
California gets the runner-up position in extreme gas taxes, with a levy of $0.6379 per gallon. Of that amount, $0.36 per gallon is due to the state excise tax, with sales taxes and a fee for underground storage tanks also adding to the total amount collected. Recently, sales taxes have fallen on a per-gallon basis as the price of fuel has dropped, putting pressure on the state government to find ways to replace lost revenue.
Somewhat surprisingly, the Keystone State tops the list of gas tax offenders, with a huge toll of $0.6890 per gallon. At current prices, that makes up nearly a third of the cost that motorists pay. The state doesn't charge a fixed excise tax, instead imposing a tax rate based on wholesale prices. Yet Pennsylvania's recent transportation funding law led to big increases in taxes, adding nearly a dime per gallon as of the beginning of the year. Another increase will add at least $0.08 per gallon in 2017, with money intended to go toward fixing bridges and performing other road repairs.
No one wants to pay more for gasoline than they have to. But with states having to pick and choose various ways to raise revenue, some will continue to use extreme gas taxes to bolster their coffers.