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Motor Fuels Taxes in a Changing Texas Transportation Scene

BY IRVING WEEKLY STAFF

Irving, Texas. July 3, 2019

Since 1923, Texas has used revenue from its motor fuels excise taxes to build and maintain our state highways, roads and bridges. In a century, our population — and our traffic — have soared. Automobiles have become much more fuel efficient and, increasingly, are being joined on our roads by hybrid and fully electric vehicles. But while driving has changed drastically, the taxes we depend on to fund our road infrastructure haven’t.

Texas Motor Fuels Taxes

In fiscal 2018, Texas motor fuels taxes brought in $3.7 billion, about 6.6 percent of all state tax collections. In that year, they were the state’s fourth-largest source of tax revenue after the sales tax, the motor vehicle sales and rental tax and the franchise tax.

The majority of our motor fuels tax revenue is used for transportation projects. In Texas, gasoline and diesel fuel are subject to a 20-cent tax per gallon. In addition, the federal government imposes taxes of 18.4 cents per gallon on gasoline and 24.4 cents per gallon on diesel fuel.

According to the American Petroleum Institute, when taking into account the federal tax (and other applicable state taxes and fees, although Texas has none of these), Texas’ total levies on gasoline and diesel are the nation’s seventh-lowest and fourth-lowest, respectively, and by far the lowest among the 10 most populous states. Texas drivers pay total levies of 38.4 cents per gallon on gasoline, versus nearly 74 cents in California and 60.4 cents in Florida, for example.

Texas’ gasoline and diesel tax rates haven’t changed since 1991, while the federal rates were last changed in 1993. In the years since, fuel prices have tripled — but since the taxes are based on volume rather than price, tax collections have risen much more slowly.

Rough Roads Ahead?

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