In this article, we will look at the 20 states with the lowest gas taxes in the US. If you want to skip our detailed analysis, go directly to the 5 States with the Lowest Gas Taxes in the US.
Gas Taxation in the US: An Analysis
The gas taxes in the US function as a user fee to fund the construction and maintenance of the roads. Gasoline taxes vary from state to state, mainly the state with higher gasoline prices will have a higher gas tax. Like other taxes, gas taxes impact the lives and finances of most Americans. Considering the current economic situation and high inflation, taxes are a burden for people who live paycheck to paycheck. The states in the US impose gasoline taxes in different ways, including sales taxes, taxes on gasoline retailers, and excise taxes per gallon purchased at the pump. These gasoline taxes gets transfer onto consumers through increased fuel prices.
The federal government imposes a tax of $0.183 per gallon on gasoline and levies $0.243 per gallon on diesel fuel. In addition, the US federal government charges a leaking underground storage tank fee of $0.01 per gallon on both gas and diesel. The US has an average gasoline price of around $3.22 per gallon, which is quite lower than the average gas price of $5 per gallon globally. The US is the top natural gas-producing country in the world in 2024 and that is why it has one of the lowest gasoline prices in the world.
This year, the Biden administration announced a pause on new licenses to export LNG to review and assess domestic energy security, raising consumer costs, and damaging the environment. The pause has created opportunities for countries including Canada and Mexico to explore the market and fill the natural gas vacuum left by the US. The gas price in the US has plunged due to weak demand and increased supply since the fall of 2023. According to the report of the US Energy Information Administration (EIA), the reduced prices of crude oil and natural gas during the first quarter of 2024 have led to a 12% drop in cash from operations for the US oil producers compared to Q1 2023. The financial reports of 36 publicly traded oil companies show that the companies suffered from reduced prices of crude oil and natural gas.
During Q1 2024, the natural gas price dropped 26% year over year and reached the lowest average monthly inflation-adjusted price since at least 1997. On September 12, Reuters reported that analysts are anticipating gasoline prices to drop below $3 per gallon for the first time in over three years. Analysts expect the gas prices to fall as soon as next month, shortly before the US presidential elections.
Lately, the rise of electric vehicles has affected the gas tax revenue. The overall improvements in vehicles have also minimized the gas tax’s ability. Therefore, many states are considering changing their gas taxes with vehicle miles traveled (VMT), while some states are exploring options for environmental or carbon taxes. Imposing environmental taxes could help in reducing the consumption of gasoline that generates emissions. California is one of the states with the highest gas taxes in the US and is looking for a carbon tax which is being considered through the Low Carbon Fuel Standard in 2025. California government agencies are expecting a $0.12 rise in carbon tax, taking the expected carbon tax to $0.47 per gallon.
The US oil and gas companies are some of the largest crude oil and gas producers in the world. Now, let’s take a look at one such gasoline producer in the US.
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An Leader in the Oil and Gas Space
Chevron Corporation (NYSE:CVX) is a leading American multinational energy corporation mainly specializing in oil and gas. The energy and petroleum company is based out of California and has a presence in more than 180 countries. CVX ranks on our list of the 10 Undervalued Wide Moat Stocks to Buy According to Analysts. Market experts believe that Chevron has strong franchise and supply chain capabilities. Considering its position, CVX is expected to deliver increased returns and margin expansion as a result of an oil-leveraged portfolio and the next phase of growth. The company is planning to complete its merger with Hess in Q3 2024. Moreover, Chevron is also focused on the TCO project in Kazakhstan and it plans for a potential concession extension in the future.
During the second quarter of 2024, Chevron Corporation (NYSE:CVX) expanded its global portfolio. The company increased its global production by 11% year over year. Chevron established collaborations in Namibia, Brazil, Equatorial Guinea, and Angola to enhance its exploration base and expand its acreage position. During Q2, the company increased its net oil-equivalent production in the US by 353,000 barrels per day, year over year. In Q2 2024, the company posted revenue of around $51.8 billion, exceeding estimates by $453.45 million and up by 4.67% year-over-year.
Chevron Corporation (NYSE:CVX) is also making progress in clean and renewable energy. In May 2024, the company successfully operated a gas turbine on a 60% hydrogen fuel blend, significantly reducing emissions. Moreover, Chevron has a 16.5 MW wind farm that can power over 13,000 homes each year. CVX has huge potential in the clean energy industry, which makes it one of the most undervalued blue chip stocks to buy according to analysts.
Over the past two years, Chevron Corporation (NYSE:CVX) has returned over $50 billion to shareholders, which accumulates around 18% of its market capitalization. CVX has a dividend yield of around 4.48%, as of September 28.
CVX is also ranked on our list of the best stocks for beginners with little money according to analysts. While we acknowledge the potential of CVX as an investment, our conviction lies in the belief that under the radar AI stocks hold great promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CVX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Now, let’s take a look at the 20 states with the lowest gas taxes in the US.
Aerial view of an oil and gas rig in the Permian Basin.
Our Methodology
To compile our list of the 20 states with the lowest gas taxes in the US, we obtained data from the Tax Foundation. The states with the lowest gas taxes in the US are ranked in descending order of their gas tax rate per gallon, as of 2024.
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20 States with the Lowest Gas Taxes in the US
20. Tennessee
Gas Tax Rate Per Gallon: $0.27
Tennessee has a gas tax rate of $0.27 per gallon and the average gas price in the state is around $2.77 per gallon, as of September 28. The state and federal excise tax rate combined is around $0.45 per gallon. Tennessee ranks among the 20 states with the lowest gas taxes in the US.
19. Massachusetts
Gas Tax Rate Per Gallon: $0.27
Massachusetts has a state gas tax rate of $0.27 per gallon and it is one of the states with the lowest gas taxes in the US. Massachusetts has an average gas price rate of $3.09 per gallon, as of September 28.
18. New York
Gas Tax Rate Per Gallon: $0.26
New York has some of the highest taxes in the US, however, the state has one of the lowest gas taxes in the country. New York has an average gas price of $3.26 per gallon, as of September 28.
17. Missouri
Gas Tax Rate Per Gallon: $0.25
Missouri has an average gas price of $2.85 per gallon, as of September 28, and imposes a gas tax of around $0.25 per gallon. Missouri has one of the lowest gas taxes and gas prices in the US.
16. Kansas
Gas Tax Rate Per Gallon: $0.25
Kansas charges a gas tax of around $0.25 per gallon, similar to that of Missouri, Connecticut, and Arkansas. The average gas price per gallon in Kansas is around $2.88. Kansas ranks among the states with the lowest gas taxes in the US.
15. Connecticut
Gas Tax Rate Per Gallon: $0.25
Connecticut ranks 15th among the states with the lowest gas taxes in the US. Connecticut has a gas price of $3.09 per gallon, as of September 28. The state imposes a gas tax rate of $0.25 per gallon.
14. Arkansas
Gas Tax Rate Per Gallon: $0.25
Arkansas has an average gas price of $2.83 per gallon, as of September 28, and charges a gas tax of $0.25 per gallon. Arkansas has an below-average state gas tax rate.
13. Wyoming
Gas Tax Rate Per Gallon: $0.24
Wyoming charges a gas tax of around $0.24 per gallon and ranks among the states with the lowest gas taxes in the US. The average gas price per gallon in Wyoming is around $3.27 per gallon, slightly higher than the average US state gas price of $3.22.
12. New Hampshire
Gas Tax Rate Per Gallon: $0.24
New Hampshire imposes a state gas tax rate of $0.24 and the ongoing average gas price in the state is around $3.02, as of September 28. New Hampshire ranks 12th among the states with the lowest gas taxes in the US.
11. Nevada
Gas Tax Rate Per Gallon: $0.24
Nevada has a gas tax rate of $0.24 per gallon which is lower than the average US state gas tax rate of $0.32. The state has an average gas price of $3.94 per gallon and ranks among the states with the lowest gas taxes in the US.
10. North Dakota
Gas Tax Rate Per Gallon: $0.23
North Dakota ranks 10th among the states with the lowest gas taxes in the US. North Dakota has a gas tax rate of $0.23 per gallon and the state has an ongoing average gas price of $3.12 per gallon, as of September 28.
9. Delaware
Gas Tax Rate Per Gallon: $0.23
Delaware has an average gas price of around $3.18 per gallon, as of September 28. Delaware imposes a gas tax rate of $0.23 per gallon.
8. Louisiana
Gas Tax Rate Per Gallon: $0.21
Louisiana is one of the states with the lowest gas taxes in the US. The state charges around $0.21 per gallon as gas tax. As of September 28, Louisiana’s average gasoline price was almost $2.76 per gallon.
7. Texas
Gas Tax Rate Per Gallon: $0.20
Texas has a gas tax rate of $0.20 per gallon which is one of the lowest in the US. The state has an average gas price of $2.74 per gallon and ranks seventh among the states with the lowest gas taxes in the US.
6. Oklahoma
Gas Tax Rate Per Gallon: $0.20
Oklahoma charges a gas tax of around $0.20 per gallon and ranks among the states with the lowest gas taxes in the US. The average gas price per gallon in Oklahoma is around $2.80, quite lower than the average US state gas price of $3.22.
5. New Mexico
Gas Tax Rate Per Gallon: $0.19
New Mexico ranks fifth among the states with the lowest gas taxes in the US. New Mexico has a gas tax rate of $0.19 per gallon and the state has an ongoing average gas price of $3 per gallon, as of September 28.
4. Hawaii
Gas Tax Rate Per Gallon: $0.19
Hawaii ranks among the states with the lowest gas taxes in the US. The state imposes a gas tax of $0.19 per gallon. As of September 28, the average gas price in the state is around $4.6 per gallon, the second highest among the US states.
3. Arizona
Gas Tax Rate Per Gallon: $0.19
Arizona ranks third among the states with the lowest gas taxes in the US. Arizona has a gas price of $3.32 per gallon, as of September 28. The state imposes a gas tax rate of $0.19 per gallon, similar to that of Hawaii.
2. Mississippi
Gas Tax Rate Per Gallon: $0.18
Mississippi charges around $0.18 per gallon as gas tax. As of September 28, the state has an average gas price of around $2.69 per gallon, the lowest among the US states. Mississippi ranks second among the states with the lowest gas taxes in the US.
1. Alaska
Gas Tax Rate Per Gallon: $0.09
The state that levies the lowest gas tax rate is Alaska, which imposes a gas tax of around $0.09 per gallon. However, Alaska has one of the highest average gas prices which is around $3.66 per gallon, as of September 28. Alaska ranks first among the states with the lowest gas taxes in the US.
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Disclosure. None. This article was originally published on Insider Monkey.