Posted by Content Coordinator on Wednesday, April 25th, 2012


Gas prices have increased substantially since the beginning of this year, continuing their upward trend since 1990. American drivers are pushing the federal and state governments to implement policies to lower gas prices, including a gas tax holiday. But gasoline taxes have not contributed to the increase in gas prices. Rather than bringing pump prices down, lowering gasoline taxes or having gas tax holidays will mostly shift gasoline purchases across state lines or encourage people to fuel up during the gas tax holidays. Such proposals will siphon away revenues from already cash-strapped states and do little to help consumers and the economy.

From January through April of this year, gas prices rose from $3.30 per gallon to $3.94, on average, according to the Energy Information Administration (EIA) (Energy Information Administration 2012). This is close to the recent historic high of $4.11 achieved in July 2008. Since gas prices usually rise during the summer, they will likely approach that high in the coming months. Further, average real prices in 2011 were at an all-time high of $3.52, and this year’s prices look primed to break that record. Last year, gas prices averaged $3.30 through the first week of April whereas they are averaging $3.61 through the first week of April this year.

The national average masks considerable variation across states (figure 1). According to the American Automobile Association Daily Fuel Gauge Report, on April 23, Hawaii had the highest average gas price ($4.61) while Alaska had the second highest ($4.35) (table 1). An additional six states and the District of Columbia also had averages above $4.00 a gallon. The lowest average price was in Missouri and Oklahoma ($3.60).

In contrast to the substantial change in gas prices, gas taxes have varied little in recent years. The federal gas tax has been 18.4 cents per gallon since October 1997. State and local gas taxes and fees per gallon have meanwhile averaged between 21 cents and 27 cents since January 2000, according to the EIA (Energy Information Administration 2012). As of 2011, average state and local gas taxes and fees were about 22 cents, or 11 percent of gas prices, down sharply from 31 percent of gas prices in 2002 (table 2). The price of crude oil is the dominant driver of gas prices, as it has risen from 45 cents per gallon in January 2000 to $2.57 per gallon in February 2011 (January 2012 dollars; figure 2).


About The Tax Policy Center
“The Tax Policy Center is a joint venture of the Urban Institute and Brookings Institution. The Center is made up of nationally recognized experts in tax, budget, and social policy who have served at the highest levels of government.”

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