Role of Federal Gasoline Excise Taxes in Public Policy [August 16, 2011]   [open pdf - 236KB]

"American drivers, compared to those in industrialized nations in Europe, pay relatively low federal, state, and local gasoline and diesel excise taxes. The federal taxes are used specifically to fund annual highway construction, maintenance, and mass transit. Over the years, proposals have come forth to raise the federal tax as a way to address long-standing national policy concerns, including U.S. dependence on imported oil and various environmental problems related to large volumes of gasoline consumption. The current federal gasoline tax legislation is set to expire on September 30, 2011, and renewal of the tax could be controversial. Policy attention on the role of the gasoline tax has also increased recently due to two major developments. First, the 2008 and 2011 oil and gasoline price run-ups and continuing effects of the economic downturn have periodically led to a decline in gasoline tax revenues available for needed highway construction and maintenance. Second, the volatility of gasoline prices has affected investment planning (e.g., for alternative fuels and vehicles) and arguably contributed to the troubles facing domestic automobile manufacturers. […] Depending on the specified purpose of a new gasoline tax increase, it could be modest, or more significant. Because the demand for gasoline is quite price insensitive (inelastic), significant revenues could be generated with little change in real consumption, even with a relatively low tax increase. A more substantial tax increase would likely be needed to change consumer preferences and business investment decisions. Any debate on modifying the gasoline excise tax will likely revolve around these tensions."

Report Number:
CRS Report for Congress, R40808
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