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.
blog May 12, 2017
South Carolina’s Gas Tax Deal: Could Have Been Worse, Could Have Been BetterSouth Carolina lawmakers this week raised the state’s gas tax for the first time in 28 years, a time period that tied for the third-longest in the nation. While the…
blog May 10, 2017
Gas Taxes Increases Continue to Advance in the States
This post was updated July 12, 2017 to reflect recent gas tax increases in Oregon and West Virginia.
As expected, 2017 has brought a flurry of action relating to state gasoline taxes. As of this writing, eight states (California, Indiana, Montana, Oregon, South Carolina, Tennessee, Utah, and West Virginia) have enacted gas tax increases this year, bringing the total number of states that have raised or reformed their gas taxes to 26 since 2013.
news release April 23, 2017
New Analysis: Average Alaskan Would Pay Less Under Income Tax Than Under Other Fiscal OptionsCutting the Permanent Fund Dividend (PFD) or Implementing a Sales Tax Would Be Costlier than Income Tax for Most Alaskans A new analysis by the Institute on Taxation and Economic…
news release March 29, 2017
Gas Tax Trivia Apropos for April Fool’s DayApril 1 will mark the longest-running streak that the federal gas tax has remained stagnant, a short analysis from the Institute on Taxation and Economic Policy reveals. Saturday will mark…
blog March 29, 2017
The April Fool’s Joke Is on Consumers: April 1 Marks Record-Breaking Procrastination on Federal Gas Tax PolicyIt’s only appropriate that April 1 will mark a new milestone in foolish federal transportation infrastructure policy. On Saturday, the nation’s federal gasoline tax rate will have been stuck at…
blog March 23, 2017
Taxing the Gig EconomyOur ever-changing economy demands that lawmakers update our tax laws to keep pace. Take, for example, the growth of online sales. As recently as six years ago, Amazon, the nation’s…
blog March 21, 2017
Amazon Will Collect Every State Sales Tax by April 1For decades, Amazon.com helped its customers dodge the sales taxes they owed to gain an advantage over its competitors. But as the company’s business strategy has changed, so has its…
report March 15, 2017
Taxes and the On-Demand Economy
A growing number of Americans are getting rides or booking short-term accommodations through online platforms such as Uber and Airbnb. This is nothing new in concept; brokers have operated for hundreds of years as go-betweens for producers and consumers. The ease with which this can be done through the Internet, however, has led to millions of people using these services, and to some of the nation’s fastest-growing, high-profile businesses.
The rise of this on-demand sector, sometimes referred to as the “gig economy” or, by its promoters, the “sharing economy,” has raised a host of questions. For state and local governments, one of them is: How do the services provided by these companies fit into the current tax system? All three of the major categories of revenue sources relied upon by state and local governments, including consumption taxes, income taxes, and property taxes, are impacted to some extent by the on-demand economy. While Uber, Airbnb, and similar on-demand companies are still relatively small in relation to the overall U.S. economy (accounting for 0.5 percent of the U.S. workforce), they are large enough to have a meaningful impact on state tax collections, and their explosive growth and entry into new lines of business will amplify their importance in the years ahead.
blog February 15, 2017
What to Watch in the States: Modernizing Sales Taxes for a 21st Century EconomyThis is the fourth installment of our six-part series on 2017 state tax trends. The introduction to this series is available here. State lawmakers often find themselves looking for ways…
report February 9, 2017
State Gasoline Taxes: Built to Fail, But Fixable
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.
blog February 2, 2017
What to Watch in the States: Gas Tax Hikes and SwapsThis is the second installment of our six part series on 2017 state tax trends. The introduction to this series is available here. State tax policy can be a divisive…
blog January 30, 2017
And Then There Were Six: Amazon Expands Its Sales Tax CollectionUPDATE: After this post was published, Amazon announced that it will begin collecting sales tax in Oklahoma on March 1. This post has been updated to reflect this development. The…
blog January 25, 2017
47 Years Later, Alaska Considers Playing Catch-Up with its Motor Fuel TaxAlaska Gov. Bill Walker recently proposed tripling the gasoline and diesel tax rates paid by Alaska motorists to generate funding for the state’s infrastructure. In a different state, tripling the…
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. 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. 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:
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.
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.
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.
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.
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.
brief September 14, 2016
Options for a Less Regressive Sales Tax
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.
report August 8, 2016
Achieving Sustainable Infrastructure Revenue with Gas Tax Reform
This brief outlines the causes of Louisiana’s infrastructure revenue shortfall and offers recommendations for how the state can achieve “sufficient increased levels of recurring funding to address the transportation backlog in highway and bridge maintenance needs in Louisiana,” as per the Task Force’s mandate.
brief July 27, 2016
Why Sales Taxes Should Apply to ServicesRead this Policy Brief in PDF here. General sales taxes are an important revenue source for state governments, accounting for close to one-third of state tax collections nationwide. But most…
brief July 11, 2016
Sales Tax Holidays: An Ineffective Alternative to Real Sales Tax ReformThis brief was updated July 2018 Read this Policy Brief in PDF here. Sales taxes are an important revenue source, composing close to half of all state tax revenues. But…
report June 28, 2016
How Long Has it Been Since Your State Raised Its Gas Tax?An updated version of this report has been published with data through July 1, 2017. Read this Policy Brief in PDF form Many states’ transportation budgets are in disarray, in…
brief February 5, 2016
How Long Has it Been Since Your State Raised Its Gas Tax?
Many states’ transportation budgets are in disarray, in part because they are trying to cover the rising cost of asphalt, machinery, and other construction materials with a gasoline tax rate that is rarely increased. A growing number of states have recognized the problem with this approach and have switched to a “variable-rate” gas tax under which the tax rate tends to rise over time alongside either inflation or gas prices. A majority of Americans live in a state where the gas tax is automatically adjusted in this way.