Thursday, December 23, 2010

How much is the Federal and State tax on a gallon of gas? Oh, you did not know taxes were already included...Find out how much you pay relative to other states...

Gasoline prices are inching up lately due to the increase in the price of crude oil. The media often reports regional differences in gas prices, but seldom goes deeper in examining why.  One reason is differences in State gas taxes assessed per gallon of gas.  Embedded in the price of a gallon of gas at the pump is a Federal gas tax of $.18 ("18 cents") plus the State tax. This link Gasoline prices and taxes by state will take you to an interactive graph showing each States retail price of gas AND the State tax per gallon (you have to subtract 18.4 cents from the total to get the state tax).  Texas and Californial have a pretty large difference in retail price--$2.85 vs $3.28 respectively.  The State gas tax in Texas is $.20  and the State tax in California is $.461, a difference of $.261.  If we factor out the difference in State taxes, we find the "real" price of gas in California is $3.02 ($3.28 minus $.261) compared to $2.85 in Texas. Still higher, but not as dramatic.  What else could account for the relative difference in prices? 

Now, this does not make motorists in California feel any better but it does make the gas price comparison a little more honest.

Upon 30 seconds of reflection, I find at least one hole in my analysis (a pretty big one)....Look at the graph and see if you can find out what I missed...EXTRA CREDIT on the final is at stake!!!
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