Every state levies taxes on gasoline and diesel fuel, usually just called “gas taxes.” These taxes are an important source of state revenue–particularly for transportation–but their poor design has resulted in sluggish revenue growth that fails to keep pace with state infrastructure needs. This ITEP Policy Brief explains how state gas taxes work, their importance as a transportation revenue source, the problems confronting gas taxes, and the types of gas tax reforms that are needed to overcome these problems.
Publications
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report February 9, 2017 State Gasoline Taxes: Built to Fail, But Fixable
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report January 31, 2017 State Tax & Revenue Information
Below is a list of notable resources for information on state taxes and revenues: Alabama Alabama Department of Revenue Alabama Department of Finance – Executive Budget Office Alabama Department of… -
report January 26, 2017 Fairness Matters: A Chart Book on Who Pays State and Local Taxes
When states shy away from personal income taxes in favor of higher sales and excise taxes, high-income taxpayers benefit at the expense of low- and moderate-income families who often face above-average tax rates to pick up the slack. This chart book demonstrates this basic reality by examining the distribution of taxes in states that have pursued these types of policies. Given the detrimental impact that regressive tax policies have on economic opportunity, income inequality, revenue adequacy, and long-run revenue sustainability, tax reform proponents should look to the least regressive, rather than most regressive, states in crafting their proposals.
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report January 25, 2017 Alaska’s Motor Fuel Tax: A National and Historical Outlier
Alaska Gov. Bill Walker recently proposed tripling his state’s motor fuel tax rates.[1] While a variety of fuel types would be affected by this proposal, three-fourths (or $60 million) of the revenue raised each year would come from higher taxes on gasoline and diesel fuel–sometimes referred to as highway fuels–purchased by Alaska motorists.
Absent any national or historical context, tripling Alaska’s gasoline and diesel fuel tax rates may sound like a radical policy change. But an adjustment of this size is necessary because Alaska lawmakers have not updated the state’s basic highway fuel tax rate since May 1970–almost 47 years ago.[2] Because of this inaction, Alaska’s highway fuel tax has become an outlier when compared to other states’ tax rates, or when compared to Alaska’s own history.
This brief discusses four ways in which Alaska’s highway fuel tax is an outlier:
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report January 18, 2017 Multinational Corporations Would Receive Half a Trillion in Tax Breaks from Trump’s Repatriation Tax Proposal
One of the central questions for lawmakers looking to reform the federal tax code this year is how to address the $2.5 trillion in earnings that U.S. companies are holding offshore to avoid taxes. Lawmakers on both sides of the aisle have supported proposals that would either require or allow companies to repatriate these earnings to the United States at a discounted tax rate. These proposals have ranged from letting companies repatriate their earnings tax-free to requiring them to immediately pay a discounted rate of 20 percent. All of the proposals would give corporations a substantial tax discount and forego much-needed revenue.
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brief January 17, 2017 Most Americans Live in States with Variable-Rate Gas Taxes
The federal government and many states are unable to adequately maintain the nation’s transportation infrastructure in part because the gasoline taxes intended to fund infrastructure projects are often poorly designed. Thirty states and the federal government levy fixed-rate gas taxes where the tax rate does not change even when the cost of infrastructure materials rises or when drivers transition toward more fuel-efficient vehicles and pay less in gas tax. The federal government’s 18.4 cent gas tax, for example, has not increased in over twenty-three years. Likewise, more than twenty states have waited a decade or more since last raising their own gas tax rates.
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brief January 17, 2017 How Long Has It Been Since Your State Raised Its Gas Tax?
Many state governments are struggling to repair and expand their transportation infrastructure because they are attempting to cover the rising cost of asphalt, machinery, and other construction materials with fixed-rate gasoline taxes that are rarely increased.
The chart accompanying this brief shows (as of January 1, 2017) the number of years that have elapsed since each state’s gas tax was last increased.
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brief December 21, 2016 State Estate and Inheritance Taxes
For much of the last century, estate and inheritance taxes have played an important role in fostering strong communities by promoting equality of opportunity and helping states adequately fund public services. While many of the taxes levied by state and local governments fall most heavily on low-income families, only the very wealthy pay estate and inheritance taxes.
Changes in the federal estate tax in recent years, however, caused states to reevaluate the structure of their estate and inheritance taxes. Unfortunately, the trend of late among states has tended toward weakening or completely eliminating them. But this need not be so; states can restore or improve their estate and inheritance taxes as a vital progressive revenue source to support services and communities while also protecting the source from the whims of federal lawmakers. This policy brief explains state inheritance and estate taxes, discusses recent state trends and policy decisions that have impacted the taxes, and explores how states can adopt or strengthen these important components of a progressive tax structure.
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report December 7, 2016 The Federal Estate Tax: A Critical and Highly Progressive Revenue Source
For years, wealth and income inequality have been widening at a troubling pace. A recent study estimated that the wealthiest 1 percent of Americans held 42 percent of the nation’s wealth in 2012, up from 28 percent in 1989. Public policies have exacerbated this trend by taxing income earned from investments at a lower rate than income from an ordinary job and by dramatically cutting taxes on inherited wealth. Further, lawmakers have done little to stop aggressive accounting schemes designed to avoid the estate tax altogether.
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report December 7, 2016 Fact Sheet: Preserving the Estate Tax
The federal estate tax is one of our most progressive sources of revenue and a critical tool in the fight against rising wealth inequality. Congressional legislation has significantly eroded the tax over the years, and now it is levied on only the wealthiest 0.2% of estates, meaning that 99.8% of estates will have no federal estate tax liability. The estate tax should be not only preserved but restored to a historical level to increase revenues and ensure more progressivity in the tax system.
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report November 30, 2016 Privatization, Waste, and Unfunded Projects: The Problems with Trump’s Infrastructure Proposal
In his acceptance speech, President-elect Donald Trump placed a heavy emphasis on the need to rebuild the nation’s infrastructure. In theory, expanded investments in our nation’s infrastructure could generate wide support among the public and within Congress. And yet Congressional negotiations on this issue have repeatedly broken down because of disagreements over how to fund those investments. Unfortunately, a flawed proposal for new funding put forth by Mr. Trump fails to offer a realistic path forward.
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brief November 28, 2016 State Tax Preferences for Elderly Taxpayers
State governments provide a wide array of tax breaks for their elderly residents. Almost every state that levies an income tax allows some form of income tax exemption or credit for citizens over age 65 that is unavailable to non-elderly taxpayers. Most states also provide special property tax breaks to the elderly. Unfortunately, too many of these breaks are poorly-targeted, unsustainable, and unfair. This policy brief surveys federal and state approaches to reducing taxes for older adults and suggests options for designing less costly and better targeted tax breaks.
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report November 28, 2016 Comprehensive Guide to “Repatriation” Proposals
Corporations falsely claim that they have to engage in offshore tax avoidance maneuvers because the U.S. corporate tax rate is too high, an argument which has unfortunately found an audience in lawmakers on both sides of the aisle. In 2017, Congress likely will evaluate a number of approaches to taxing the trillions of dollars corporations currently hold offshore. This report explains and evaluates these proposals, including a so-called repatriation holiday and deemed repatriation. Further, it explains why ending deferral of taxes on U.S. multinational corporations’ foreign earnings could halt the widespread corporate practice of funneling money to subsidiaries for the express purpose of avoiding taxes.
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report November 28, 2016 Fact Sheet: What You Need to Know About Repatriation Proposals
Fortune 500 corporations collectively have stashed $2.5 trillion in profits offshore, on which they have avoided up to $718 billion in taxes. It’s no wonder that policymakers on both sides of the aisle are weighing legislative options to either tax these profits or create an incentive for corporations to “repatriate” or bring these profits to the United States so that they are subject to taxation.
Lawmakers have introduced several “repatriation” proposals that would glean tax revenue from these offshore profits. But the only solution that will ensure corporations pay taxes on their offshore profits AND shut down the practice of stashing cash offshore is to end deferral, the tax code loophole that allows corporations to indefinitely avoid paying taxes on profits stashed offshore.
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brief November 18, 2016 Collecting Sales Taxes Owed on Internet Purchases
Retail trade has been transformed by the Internet. As the popularity of “e-commerce” (that is, transactions conducted over the Internet) has grown, policymakers have engaged in a heated debate over how state and local sales taxes should be applied to these transactions. This debate is of critical importance for states as sales taxes comprise close to one-third of all state tax revenues and hundreds of billions of dollars in retail spending is now occurring online.
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report November 15, 2016 Fact Sheet: Comparison of House GOP Tax Plan, Trump’s Initial Tax Proposal and Trump’s Revised Tax Proposal
Chart comparing House GOP Tax Plan, Trump’s Initial Tax Proposal and Trump’s Revised Tax Proposal.
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report October 28, 2016 The Short and Sweet on Taxing Soda
The concept of taxing sodas and other sugary beverages has gained traction recently across the United States and around the world. The World Health Organization officially recommended a tax on sugar sweetened beverages as a way to battle the obesity epidemic. In the US, multiple states and localities have looked to taxes on sugar sweetened beverages as a way to improve public health and increase revenue. In 2014, Berkeley, California became the first U.S. locality to enact such a tax. In 2016, similar taxes were enacted in Boulder, Colorado; Albany, Oakland, and San Francisco, California; Cook County, Illinois; and Philadelphia, Pennsylvania.
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brief October 18, 2016 Cigarette Taxes: Issues and Options
Efforts to increase taxes usually face some opposition, particularly increases to broad-based taxes such as the sales or income tax. Yet in many states, lawmakers have been able to agree on one approach to revenue-raising: the cigarette tax. Since 2002, nearly every state has enacted a cigarette tax in-crease to fund health care, discourage smoking, or to help balance state budgets. This policy brief looks at the advantages and disadvantages of cigarette taxes, and cigarette tax increases, as a source of state and local revenue.
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report October 12, 2016 State Tax Subsidies for Private K-12 Education
This report explains the workings, and problems, with state-level tax subsidies for private K-12 education. It also discusses how the Internal Revenue Service (IRS) has exacerbated some of these problems by allowing taxpayers to claim federal charitable deductions even on private school contributions that were not truly charitable in nature. Finally, an appendix to this report provides additional detail on the specific K-12 private school tax subsidies made available by each state.
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report October 4, 2016 Offshore Shell Games 2016
This study explores how in 2015 Fortune 500 companies used tax haven subsidiaries to avoid paying taxes on much of their income. It reveals that tax haven use is now standard practice among the Fortune 500 and that a handful of the country’s wealthiest corporations benefit the most from this tax avoidance scheme.
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report September 30, 2016 Comment Letter to FASB on Income Tax Disclosure
We appreciate the Financial Accounting Standards Board’s (FASB) ongoing review of its accounting standards to ensure that financial statements are “facilitating clear communication of information that is important to financial statement users.” Overall, the changes to disclosure requirements proposed by FASB in the exposure draft would represent a significant step forward toward providing users of financial statements the clarity that they need. We believe, however, that the exposure draft does not go far enough in providing the clarity needed and sought by investors and the public alike.
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report September 15, 2016 State Tax Codes as Poverty Fighting Tools
Despite this unlevel playing field states create for their poorest residents through existing policies, many state policymakers have proposed (and in some cases enacted) tax increases on the poor under the guise of “tax reform,” often to finance tax cuts for their wealthiest residents and profitable corporations.
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brief September 14, 2016 Property Tax Circuit Breakers
State lawmakers seeking to make residential property taxes more affordable have two broad options: across-the-board tax cuts for taxpayers at all income levels, such as a homestead exemption or a tax cap, and targeted tax breaks that are given only to particular groups of low- and middle-income taxpayers. One such targeted program to reduce property taxes is called a “circuit breaker” because it protects taxpayers from a property tax “overload” just like an electric circuit breaker: when a property tax bill exceeds a certain percentage of a taxpayer’s income, the circuit breaker reduces property taxes in excess of this “overload” level. This policy brief surveys the advantages and disadvantages of the circuit breaker approach to reducing property taxes.
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brief September 14, 2016 Reducing the Cost of Child Care Through State Tax Codes
Low- and middle-income working parents spend a significant portion of their income on child care. As the number of parents working outside of the home continues to rise, child care expenses have become an unavoidable and increasingly unaffordable expense. This policy brief examines state tax policy tools that can be used to make child care more affordable: a dependent care tax credit modeled after the federal program and a deduction for child care expenses.
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brief September 14, 2016 Rewarding Work Through State Earned Income Tax Credits
The Earned Income Tax Credit (EITC) is a policy designed to bolster the earnings of low-wage workers and offset some of the taxes they pay, providing the opportunity for struggling families to step up and out of poverty toward meaningful economic security. The federal EITC has kept millions of Americans out of poverty since its enactment in the mid-1970s. Over the past several decades, the effectiveness of the EITC has been magnified as many states have enacted and later expanded their own credits.