In case you didn’t know, the United States has a fuel tax – meaning there is an excise tax on the sale of fuel. This tax has been in effect since 1932, but many don’t know why it was introduced. Our fleet fuel card company is here to explain:
During the 1920s, the U.S. saw one of the best periods of prosperity in history, which is why the 20s were called “the roaring 20s.” In October of 1929, however, the stock market collapsed and the country entered the Great Depression. Herbert Hoover was the president at the time (having just took office in March) and understood that with such a devastation, he would be able to balance the country’s budget anytime soon.
Instead of continuing to spend more money than the country had, Hoover created a revenue bill that increased a large number of taxes – he increased estate taxes, personal income taxes, corporation taxes, and sales taxes. He also reduced government expenditures by decreasing salaries, paid vacation, and pensions.
This is where the fuel tax comes in: In early 1932, the House of Representatives passed a version of the Revenue Act that included an oil tariff tax that was set at one cent per gallon of imported fuel. Shortly after that, the Senate passed its own version of the bill and changed the oil tax tariff to include gasoline sales, not just imports. This was proposed to raise $150 million and went into effect that year.
Through the Years…
Ever since the first fuel tax was created, it has been increased every few years to help cover costs of government spending, national projects, and more. Here is how the fuel tax increased since 1932:
1951 – 2 cents per gallon
1956 – 3 cents per gallon
1959 – 4 cents per gallon
1983 – 9 cents per gallon
(President Ronald Reagan approved a 5-cent fuel tax hike to fund highway construction and transit systems.)
1990 – 14.1 cents per gallon
(President George H.W. Bush increased the fuel tax price to help reduce the federal budget deficit.)
1993 – 18.4 cents per gallon
(President Bill Clinton increased the fuel tax price again to help reduce the federal budget deficit.)
Today, the fuel tax remains at 18.4 cents per gallon (24.4 cents for diesel), however, state and local fuel taxes are added to this figure depending on the state you live in, so you may be paying a larger fuel tax than someone in the next state over. Nevertheless, the U.S. will continue to pay a fuel tax.