A Brief History of the Federal Gasoline Tax
The government has been taxing our fuel for over 80 years—and right from the get-go, the money was going to things other than roads and bridges.
As Congress considers raising the federal tax on gasoline for the first time since 1993, consider highlights from a history of the tax prepared by the Congressional Research Service (CRS). In 1911, just three years after the Model T was introduced, Oregon became the first state to tax motor fuels. By 1932, every state and the District of Columbia had followed suit. And in 1932, the feds got in on the act.
A temporary 1-cent-a-gallon federal tax is imposed. It is not dedicated to building roads but rather to deficit reduction in the midst of the Great Depression. It is scheduled to expire in 1934.
Congress votes to extend the tax and increase the rate to 1.5 cents a gallon.
When Prohibition ends (so the feds can again tax booze), the gas tax falls back to 1 cent a gallon, where it stays until 1940.
In anticipation of World War II, the tax rate is hiked to 1.5 cents a gallon through June 1945. Later, it is made permanent at that level.
To help pay for the Korean War, Congress boosts the gas tax to 2 cents a gallon.
Congress creates the Highway Trust Fund, increases the federal gas tax to 3 cents a gallon and dedicates 100% of the revenue to the Trust Fund to help pay for the interstate highway system.
Congress pushes the tax to 4 cents a gallon.
Lawmakers add a nickel a gallon, setting the rate at 9 cents a gallon, with 1 cent dedicated to mass transit projects.
An additional 5 cents a gallon is added, bringing the tax to 14 cents a gallon. Half of the increase is dedicated to highways, the other 2.5 cents aimed at deficit reduction (the same goal as the original tax in 1932).
Congress adds 4.3 cents a gallon to the gasoline tax, with the added revenue dedicated to deficit reduction. With the addition of the 0.1-cent-a-gallon levy to fund the leaking underground storage tank trust fund the federal tax rose to 18.4 cents a gallon. That’s where it stands today. Since 1997, the full federal gasoline tax has gone to the Highway Trust Fund.