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Did you know there is a tax on gas?

Did you know there is a tax on gas?

November 25, 2019

Taxes are a constant everywhere in life. For many, gas seems like the one good which is not subject to taxes. However, unlike most other goods in the United States, the price displayed represents the total price – including taxes. Minnesota residents pay a $0.28 state tax in addition to a $0.184 federal tax on every gallon of gas. Out of the 50 states, Minnesota has the 28th highest gas tax rate. This tax reached 13.8 percent in mid-January 2019. Consumers have a right to know how much taxes they are paying at the pump.

Take a moment to think of any other good which specifically groups the tax into the price or does not display the tax rate on the receipt. There exists no other products which hide the tax amount within the price of the product. It seems quite malicious that this additional cost is secretly funneled into the cost of fuel – especially when the federal government is involved.

In 2007, the Secretary of Transportation admitted that about 60 percent of federal gas taxes are used for highway and bridge construction while the remaining 40 percent goes to earmarked programs. These earmarked proceeds typically sit within a rainy day fund for the Department of Transportation to do who knows what. On the state level, these tax revenues follow nearly the same trend but are used directly at a higher rate for infrastructure projects. Minnesotans see the effects of these taxes year-round as construction seems to also be a constant in life.

The gas taxes imposed by the state represent a useful method for selectively raising funds for a service from those who use the service the most. The federal gas tax is akin to a sales tax, however it is nearly triple the cost. While these taxes may be necessary, the question of why they are hidden to the consumer still lingers.

One current method for exposing this petty structure is through a truth-in-labeling law. This law would mandate gas stations to inform consumers of exactly how much of the price is going to the gas and how much is going to state and federal taxes. The easiest method for implementation of this proposal is a simple label placed on each pump. These labels would be funded by the state and federal tax subsidies and do not represent an undue burden. Another option would be to include this information on printed receipts – like every other good sold within the United States.

These taxes are not the end of the world and represent a legitimate method for raising vehicle related funding; however, there needs to be transparency with the consumer. Increased transparency will lead the public to understand the complete cost of a transportation infrastructure better and likely cut down on fuel consumption.

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