Americans are feeling a pain at the pump. But who is to blame for the higher prices?
Government taxes and fees can make up a significant portion of the overall burden. The federal government charges slightly more than 18-cents per gallon in gas tax. State taxes are added on to that cost.
The Tax Foundation recently updated the list of states with the highest gas taxes. The Mountain States generally fall in the middle of the pack. In Idaho, for example, drivers pay a total of 33-cents per gallon. In Montana, it's nearly 34-cents per gallon.
In Washington State, however, the burden approaches 50-cents per gallon. And that does not include the cost of the recently-implemented low carbon fuel standard and carbon tax.
Media outlets across Eastern Washington, in particular, are pointing to the large disparity in Idaho and Washington gas prices. Drivers can save as much as 75-90 cents per gallon by filling-up in Idaho.
The U.S. Department of Transportation says gas taxes make up about 19% of the overall cost of a gallon – but this will vary depending on the state and the current price. For example, if the gas price is high, the gas tax percentage will be lower. Likewise, if the gas price is low, the gas tax percentage could be much higher.
In most states, gas taxes are mostly used to fund roads, bridges and a state’s transportation system. And, so long as the money is being used wisely, most drivers are okay with that. However, when policymakers adopt gas tax hikes, there is no accountability built into the system. The cost is hidden in the price.
This is unusual when purchasing almost any product. After all, the price of a loaf of bread at the grocery store does not have the sales tax built in. Neither does the purchase of a bottle of water. Most consumers can see the tax burden they face on their receipt.
If they don’t like it or don’t think it’s being used properly, they can talk to their elected officials. But with gas taxes, consumers are left in the dark.
In 2017, Washington state passed a law requiring the Washington state Department of Agriculture to produce a sticker that would be placed on every gas pump near the weights and measures certification. The sticker would simply inform drivers of their state and federal tax burden.
In Washington, the WSDA conducts periodic inspections of gas pumps, so it made sense to assign the transparency task to that agency.
Overall, drivers responded positively to the stickers. The cost for taxpayers was minimal – simply the price of the stickers – as state workers already travel around the state to pumps for weights and measure tests.
In Ohio, state workers began placing the stickers on gas pumps in 2019, as part of a deal to increase the gas tax. In Utah, gas tax stickers are being placed at stations beginning this year.
This simple, transparent idea should be considered in Idaho and across the Mountain States. Since government taxes and fees make up such a large portion of the overall cost of a gallon of gas, a “truth-in-labeling” policy is a reform worth pursuing.