Gasoline Taxes

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GASOLINE TAXES were first used as a means to finance the American automobile highway system and have become a policy tool for environmental and foreign trade purposes. Oregon, Colorado, and New Mexico passed the first gasoline taxes, and by 1929 every state was using gasoline taxes to build highways. The tax met little opposition: it seemed fair to the public because those who used the highways paid the tax, and oil merchandisers supported highway building as a means to increase automobile use. Collected from wholesalers at very small cost to governments, the tax soon grew; by 1930, when all states had come to impose gasoline taxes, such taxes brought in $500 million ($5.385 billion in 2002 dollars) annually. By the depression of the 1930s some strong opposition had emerged. Yet the pressure for highway-building funds was so great that more than half of the nation's main highways were financed by gasoline taxes. Oil merchandisers, along with others who expected to benefit, put their effort into preventing the diversion of gas tax monies into nonhighway uses. The first federal gasoline tax dates to 1956, when the federal government took on the task of building an interstate highway system, in response to strong pressure from the public. The federal gasoline tax was one of several highway-user payments that fed the Highway Trust Fund, the federal fund for highway building.

In the postwar era lawmakers periodically turned to gas taxes to change consumer behavior, in order to reduce reliance on imported oil, or to reduce pollution. In the mid-1970s, the government began using gasoline taxes to encourage energy conservation. In that same period both state and federal governments were increasingly pressured to use gas tax monies for nonhighway purposes, particularly for mass transit. Increasing diversion suggested that the absolute hegemony of the private automobile in the United States appeared to be coming to an end.

However, the 1970s conservation policies were largely overturned in the 1980s by President Ronald Reagan, and although a gas tax remains, its size and even existence are controversial, though U.S. consumers pay only about one-fifth the gas tax that Europeans pay. In the late twentieth century, rising concern over possible links between fossil fuel use and global warming prompted environmental groups and policymakers to propose gas taxes to make gas prices more accurately reflect the real costs, including environmental impact. Arguing that the oil and gas industry is substantially subsidized through federal policy, thereby keeping gas prices artificially low, gas tax advocates argued that Americans would continue to seek "gas-guzzling" vehicles so long as fuel costs remained too low. Throughout President Clinton's adminstration, the issue was highly volatile. As fears of global warming spread, the Clinton adminstration sought policy changes so that the United States could meet its commitment to cut greenhouse gas emissions, under the United Nations Framework Convention on Climate Change. The fossil fuel industry lobbied heavily against any increase in gas taxes, arguing that fossil fuel use was not responsible for global warming. In 1993 the administration had to fight a bitter battle to raise the tax just four cents. On the other hand, at the turn of the twenty-first century, bipartisan opposition in Congress stymied some Republicans' efforts to reduce the gas tax. Some opponents argued that cutting or eliminating the gas tax would break the federal government's promise to guarantee a steady source of revenue for state construction programs.

In 2002 President George W. Bush surprised many people when his administration issued a report indicating that global warming was, indeed, a serious problem. However, he advocated solutions that involved adapting to climate change rather than trying to slow the process through cutting emissions. At the turn of the twenty-first century, the gasoline tax was about forty cents per gallon—a small fraction of the tax most European countries levy on gas.


Burnham, John C. "The Gasoline Tax and the Automobile Revolution." Mississippi Valley Historical Review, 48 (1962): 435–459.

Chernick, Howard, and Andrew Reschovsky. "Who Pays the Gasoline Tax?" National Tax Journal (June 1997).

Fullerton, Don, and Sarah West. Can Taxes on Cars and on Gasoline Mimic an Unavailable Tax on Emissions? Cambridge, Mass.: National Bureau of Economic Research, 1999.

Goulder, Lawrence Herbert. Energy Taxes: Traditional Efficiency Effects and Environmental Implications. Cambridge, Mass.: National Bureau of Economic Research, 1993.

Kaszynski, William. The American Highway: The History and Culture of Roads in the United States. Jefferson, N.C.: Mc-Farland, 2000.

John C.Burnham

DorotheaBrowder/d. b.

See alsoAir Pollution ; Climate ; Global Warming ; Petroleum Industry ; Taxation .