California Drivers Face Nation’s Steepest Fuel Tax Mountain

California tops the Tax Foundation's list with the highest fuel taxes in the U.S. (John Sommers II/Transport Topics)

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A new fuel analysis by the Tax Foundation names California, Illinois and Pennsylvania as the states with this year’s highest diesel and gas taxes, while Alaska, Mississippi and Hawaii have the lowest.

“Diesel tax rates, similar to gas tax rates, continued to increase in 2024. Despite the rate increase, diesel and gas tax revenues are not keeping pace with road construction and maintenance costs, suggesting a substantial change to current policies will be needed,” Adam Hoffer, Tax Foundation director of excise tax policy, told Transport Topics.

The 2024 study, released Aug. 6, evaluated state gas tax rates as of January. The Tax Foundation, a Washington, D.C.-based nonprofit, nonpartisan tax policy research and analysis group, was founded 85 years ago.

“States levy taxes on fuel in a few different ways, including sales taxes, excise taxes per gallon purchased at the pump, and taxes on wholesalers or retailers, which generally get passed on to consumers via increased prices. These taxes, combined with a myriad of fees (e.g., underground storage tank fees), add to the price consumers pay at the pump,” noted the foundation, which combined taxes and associated fees to determine each state’s total gas tax rate.

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Hoffer 

As of Jan. 1, prices at the pump included state taxes and federal excise taxes of 18.3 cents per gallon on gasoline and 24.3 cents for diesel, according to the U.S. Energy Information Administration. An additional 0.1 cent per gallon is added to both fuels as a leaking underground storage tank fee.

California tops the list with the highest fuel taxes in the U.S., adding 68.1 cents in taxes to the price of a gallon of gas and 96.3 cents to a gallon of diesel.

“California places the largest additional burden on gas prices via carbon taxes, with California government agencies estimating about 12 cents being passed through from the Low Carbon Fuel Standard (to increase to 47 cents in 2025) and 27 cents being passed through from the state’s cap-and-trade program,” according to the report.

Pennsylvania and Illinois follow closely behind California in fuel tax rates. Pennsylvania ranks second for diesel taxes (74.1 cents) and third for gas taxes (58.7 cents) per gallon. Illinois has the third-highest diesel taxes (74 cents) and the second-highest gas taxes (66.5 cents) per gallon.

These rates significantly exceed the EIA’s January 2024 figures for average state tax rates: 32.44 cents per gallon for gasoline and 34.74 cents for diesel.

Illinois recently increased its per-gallon taxes on both diesel and gasoline by nearly 2 cents, effective July 1 through June 30, 2025, further widening the tax gap.

The Tax Foundation reported that Alaska (8.95 cents for diesel/gas), Mississippi (18.4 cents for diesel/gas) and Hawaii (18.5 cents for diesel/gas) had the lowest per-gallon taxes for both diesel and gasoline.

RELATED: Historical Fuel Prices Interactive Graph

The foundation’s reported tax rates did not account for the impact of some states’ environmental cap-and-trade carbon policies or low carbon fuel standards, “which drive prices even higher in California, Washington, and select northeastern states,” the Tax Foundation noted.

It explained the difficulty in calculating the per-gallon price impact of carbon and environmental taxes due to varying estimates from different sources.

“State environmental agencies tend to estimate the impact of their programs to be much lower than most economic analyses, for instance. Many environmental programs, like cap-and-trade, also have fluctuating prices and thus a fluctuating impact on gas prices,” the foundation stated.

“The exact impact of Washington’s Climate Commitment Act is hotly debated, but ecology officials and supporters of the program admit to about 27 cents of price increases. Oregon’s Clean Fuels Program was estimated to increase gas prices by 9.8 cents, and the Climate Protection Program will likely raise prices further once implemented.”

Source: Tax Foundation, From Energy Information Administration, Federal and State Motor Fuel Taxes

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