On July 1, 12 states will boost their gasoline taxes and 11 will boost their diesel taxes. The reasons for these increases vary, but they’re generally intended to fund maintenance and improvement of our nation’s transportation infrastructure–a job at which Congress has not excelled in recent years.
Sales, Gas and Excise Taxes
Sales, excise, and gas taxes are an important source of revenue for states. The sales tax, in fact accounts for half of all state tax revenue. Forty-five states levy broad-based sales taxes, every state levies at least some type of tax on consumption, and all states have a tax on gasoline. But these taxes aren’t without problems.
Sales taxes are inherently regressive—requiring lower- and middle-income taxpayers to spend a larger share of their household budgets in tax than their wealthier neighbors. The gas tax provides funding for infrastructure, but many states have not modernized their gas tax, meaning it no longer raises adequate revenue. ITEP resources on sales, excise and gas taxes provide general and state-specific information about the mechanics of these taxes and options for reform.
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blog June 27, 2019 Gas Taxes Rise in a Dozen States, Including an Historic Increase in Illinois
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brief June 27, 2019 Most Americans Live in States with Variable-Rate Gas Taxes
The flawed design of federal and state gasoline taxes has made it exceedingly difficult to raise adequate funds to maintain the nation’s transportation infrastructure. Twenty-eight 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 purchase 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 25 years. Many states have waited a decade or more since last raising their own gas tax rates.
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blog May 21, 2019 Gas Taxes Have Gone Up in Most States, but Decades-Long Procrastinators Remain
The upcoming Memorial Day weekend marks the start of the traditional summer driving season. In most states, summer road-trippers are paying more gas tax than they did a few years ago and are benefiting from smoother and safer roads as a result. In total, 30 states have raised or reformed their gas taxes in the last six years.
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May 10, 2019 Presentation: NCSL Task Force on State and Local Taxation, Taxing Cannabis
ITEP Research Director Carl Davis presented to the National Conference of State Legislatures (NCSL) Task Force on State and Local Taxation on approaches to cannabis taxation and the recent report Taxing Cannabis.
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blog February 26, 2019 Overdue Gas Tax Hikes are Back on the Agenda in Statehouses
State tax policy can be a contentious topic, but one issue on which lawmakers largely agree is that higher gas tax rates are necessary to keep our nation’s infrastructure operating safely and efficiently. Lawmakers in 27 states have approved gas tax increases since 2013.
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report January 23, 2019 Taxing Cannabis
State policy toward cannabis is evolving rapidly. While much of the debate around legalization has rightly focused on potential health and criminal justice impacts, legalization also has revenue implications for state and local governments that choose to regulate and tax cannabis sales. This report describes the various options for structuring state and local taxes on cannabis and identifies approaches currently in use. It also undertakes an in-depth exploration of state cannabis tax revenue performance and offers a glimpse into what may lie ahead for these taxes.
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blog January 23, 2019 Cannabis Tax Debates are Ramping Up; Here’s What We’ve Learned from Five Years of Cannabis Taxation Thus Far
This year lawmakers in Connecticut, Delaware, Hawaii, Illinois, New Jersey, New York, Rhode Island, and Vermont will all be debating the taxation of recreational cannabis. A new ITEP report reviews the track record of recreational cannabis taxes thus far and offers recommendations for structuring cannabis taxes to achieve stable revenue growth over the long haul.
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blog October 17, 2018 New Report Finds that Upside-down State and Local Tax Systems Persist, Contributing to Inequality in Most States
State and local tax systems in 45 states worsen income inequality by making incomes more unequal after taxes. The worst among these are identified in ITEP’s Terrible 10. Washington, Texas, Florida, South Dakota, Nevada, Tennessee, Pennsylvania, Illinois, Oklahoma, and Wyoming hold the dubious honor of having the most regressive state and local tax systems in the nation. These states ask far more of their lower- and middle-income residents than of their wealthiest taxpayers.
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blog September 25, 2018 An Unhappy Anniversary: Federal Gas Tax Reaches 25 Years of Stagnation
The federal gas tax was last raised on Oct. 1, 1993, the same year that the classic movie Groundhog Day was unveiled to the American public. In the film, Phil Connors (played by Bill Murray) gets caught in a time loop and spends decades reliving the same cold, February day in Punxsutawney, Penn. Those of us lamenting the 25-year stagnation of the federal gas tax can’t help but feel some of that same sense of repetition.
Federal lawmakers occasionally discuss updating the gas tax, but top lawmakers have yet to put in the effort needed to shepherd such a change into law. In fact, after passage of a top-heavy income and estate tax cut last year, the chances of boosting the federal gas tax anytime soon are probably slimmer than ever.
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report September 17, 2018 State Tax Codes as Poverty Fighting Tools: 2018 Update on Four Key Policies in All 50 States
This report presents a comprehensive overview of anti-poverty tax policies, surveys tax policy decisions made in the states in 2018, and offers recommendations that every state should consider to help families rise out of poverty. States can jumpstart their anti-poverty efforts by enacting one or more of four proven and effective tax strategies to reduce the share of taxes paid by low- and moderate-income families: state Earned Income Tax Credits, property tax circuit breakers, targeted low-income credits, and child-related tax credits.
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brief September 17, 2018 Options for a Less Regressive Sales Tax in 2018
Sales taxes are one of the most important revenue sources for state and local governments; however, they are also among the most unfair taxes, falling more heavily on low- and middle-income households. Therefore, it is important that policymakers nationwide find ways to make sales taxes more equitable while preserving this important source of funding for public services. This policy brief discusses two approaches to a less regressive sales tax: broad-based exemptions and targeted sales tax credits.
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report August 23, 2018 ITEP Testimony “Regarding the Final Report of the Arkansas Tax Reform and Relief Legislative Task Force”
Read the testimony in PDF WRITTEN TESTIMONY SUBMITTED TO: THE ARKANSAS TAX REFORM AND RELIEF TASK FORCE Lisa Christensen Gree, Senior State Tax Policy Analyst Institute on Taxation and Economic Policy… -
blog August 7, 2018 Updating Sales and Excise Taxes to Reflect Today’s Economy
Consumers’ growing interest in online shopping and “gig economy” services like Uber and Airbnb has forced states and localities to revisit their sales taxes, for instance. Meanwhile new evidence on the dangers and causes of obesity has led to rising interest in soda taxes, but the soda industry is fighting back. Carbon taxes are being discussed as a tool for combatting climate change. And changing attitudes toward cannabis use have spurred some states to move away from outright prohibition in favor of legalization, regulation and taxation.
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report July 24, 2018 Rep. Shuster’s Mixed Bag: Doubling the Gas Tax before Repealing It Entirely
This article examines the good aspects of Rep. Shuster’s infrastructure funding plan (a higher gas tax that is indexed to inflation), the bad (a flawed indexing formula and eventual gas tax repeal), and the downright ugly (tying the hands of a funding commission before their work even begins and refusing to ask more of high-income households).
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blog July 12, 2018 18 States Will Take Holidays from Sound Tax Policy This Year
State sales tax holidays, our newly updated policy brief shows, are the equivalent of the bad kind of holiday vacation: tax policy that sounds nice at first but ultimately cuts corners, wastes money, precludes better options, and leaves states worse off than they would be without them. Unfortunately, while several states have wised up about sales tax holidays in recent years, 18 states will fall for the superficial attraction of these tax policy gimmicks in 2018.
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brief July 12, 2018 Sales Tax Holidays: An Ineffective Alternative to Real Sales Tax Reform
An updated version of this brief for 2019 is available here. Read this report in PDF. Overview Sales taxes are an important revenue source, composing close to half of all… -
blog June 26, 2018 Gas Taxes Rise in Seven States, Including an Historic Increase in Oklahoma
A rare sight is coming to Oklahoma. The last time the Sooner State raised its gas tax rate, the Berlin Wall was still standing, and Congress was debating whether to ban smoking on flights shorter than two hours. Fast forward 31 years, and Oklahoma is finally at it again. On Sunday, the state’s gas tax rate will rise by 3 cents and its diesel tax rate by 6 cents. Both taxes will now stand at 19 cents per gallon—still among the lowest in the country. But Oklahoma isn’t the only state where gas taxes will soon rise.
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brief June 12, 2018 Lottery, Casino and other Gambling Revenue: A Fiscal Game of Chance
Cash-strapped, tax-averse state lawmakers continue to seek unconventional revenue-raising alternatives to the income, sales, and property taxes that form the backbone of most state tax systems. However, gambling revenues are rarely as lucrative, or as long-lasting, as supporters claim.
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blog May 22, 2018 Most States Have Raised Gas Taxes in Recent Years
An updated version of this blog was published in April 2019.
State tax policy can be a contentious topic, but in recent years there has been a remarkable level of agreement on one tax in particular: the gasoline tax. Increasingly, state lawmakers are deciding that outdated gas taxes need to be raised and reformed to fund infrastructure projects that are vital to their economies.
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brief May 22, 2018 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.
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blog May 3, 2018 Under Pressure, Trump Organization Abandons Risky Sales Tax Avoidance Strategy in New York. Will It Face Penalties for Taxes it Did Not Collect?
While President Trump was busy publicly shaming Amazon for failing to collect some state and local sales taxes, his own business’s online store was not only failing to collect the same taxes, but was arguably more aggressive than Amazon in refusing to do so. As of last month, TrumpStore.com was not even collecting sales tax in New York State despite having a “flagship retail store” inside Trump Tower, in Manhattan. As ITEP pointed out at that time: “It seems likely that the presence of a New York location should be enough to put TrumpStore.com within reach of New York’s sales tax collection laws.”
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blog April 20, 2018 Trends We’re Watching in 2018, Part 5: 21st Century Consumption Taxes
We’re highlighting the progress of a few newer trends in consumption taxation. This includes using the tax code to discourage consumption of everything from plastic bags to carbon and collecting revenue from emerging industries like ride sharing services and legalized cannabis sales.
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blog April 11, 2018 ITEP Resources on Amazon and the Online Sales Tax Debate
The U.S. Supreme Court is scheduled to consider a case next week (South Dakota v. Wayfair, Inc.) that has the potential to significantly improve states and localities’ ability to enforce their sales tax laws on Internet purchases.
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blog April 11, 2018 What to Expect if the Supreme Court Allows for Online Sales Tax Collection
Online shopping is hardly a new phenomenon. And yet states and localities still lack the authority to require many Internet retailers to collect the sales taxes that their locally based, brick and mortar competitors have been collecting for decades.
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blog March 30, 2018 Amazon’s Local, State and Federal Tax Issues Explained
President Trump’s latest Twitter target, the Amazon Corporation, is now under the microscope for its state and local tax avoidance. In a Thursday tweet, the President claimed that “[u]nlike others, they pay little or no taxes to state & local governments.” Such a statement is a startling reversal for a president who previously said his own ability to avoid paying income taxes “makes me smart.”