A gasoline tax (also known as a gas tax, petrol tax, fuel tax or fuel duty) is a sales tax imposed on the sale of gasoline. Frequently, as in the United States, the funds are dedicated or hypothecated to transportation, or even roads, so that the gas tax is considered by many a user fee . In other countries, the gas tax is considered a source of general revenue and is not designated for roads. The demand for the automobile is relatively inelastic—a one percent increase in the price of gas will reduce quantity demanded by much less than one percent.
The first state tax was introduced in February 1919 in Oregon. It was a 1 cent per U.S. gallon tax. In the following decade, all 48 US States (and Washington, DC) introduced a gasoline tax, and by 1939 an average tax of 3.8¢ per U.S. gallon of fuel was levied by the individual States.
While state gas taxes had been around for more than a decade, the first federal gas tax in the United States was created on June 6, 1932 with the enactment of the Revenue Act of 1932 (1 cent per U.S. gallon sold). The U.S. federal gasoline tax as of 2003 was 18.4 cents a U.S. gallon (4.86 ¢/L), and the gasoline taxes in the various states range from 10 cents to 33 cents, averaging about 22 cents (6 cents per liter).
In most countries the gasoline tax is not imposed on fuel which is not intended for transportation such as fuel used to power agricultural vehicles and home heating oil which is identical to diesel. This creates an economic incentive to illegally use fuel not intended for transportation, which might be reduced by dying the non-transportation fuel.
In the People's Republic of China, the fuel tax has been a very contentious issue. Efforts by the State Council and the Communist Party of China to institute a fuel tax in order to finance the National Trunk Highway System have run into strong opposition from the National People's Congress, largely out of concern for its impact on farmers. This has been one of the uncommon instances in which the legislature has asserted its authority.
As of 2004 fuel duty in the United Kingdom is 50.19 p/L for unleaded petrol (US$3.60 per U.S. gallon in Jan 2005 money rates).
Effects of a gasoline tax
Because of the inelastic nature of demand for gasoline, in the short run the tax will be an effective source of revenue. In the long run, however, people are more able to adjust their consumption of gasoline; that is, over a period of years, people will consume less as the price increases (by buying more fuel-efficient cars, for instance). Thus, some environmentalists have advocated a gasoline tax as a way to reduce reliance on environment-damaging fossil fuels.
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