More On Tax Planningfrom The Advisor's Professional Library
- Health Insurance: Health and Medical Savings Accounts A Health Savings Account is a trust created exclusively for the purpose of paying qualified medical expenses of an account beneficiary. Although they are popular, they are not without their pitfalls and the regulations can be complicated. Learn more about how to avoid federal taxation on the accumulation and distributions of HSA.
- Annuities: Variable Annuities Annuities are hot. The tax rules vary with the circumstances. Advisors must be aware of these intricacies when discussing annuities with clients.
The average price of gasoline in the U.S. has increased by almost 75 cents per gallon during the past year, yet only a handful of states will benefit from additional tax revenue, according to a report released Tuesday by the Tax Foundation.
The report by the Tax Foundation, a nonprofit group that monitors government tax policies, noted that the federal government and every state impose an excise tax on the sale of gasoline as a fixed number of cents per gallon. The states’ excise tax ranges from 4 cents to 35.3 cents per gallon. But because the tax rate is fixed regardless of price, states will see no increase in gas excise tax revenue as gas prices rise. They may even see a drop in revenue if demand decreases because of the higher prices.
However, some states apply a sales (or similar) tax to gasoline on top of their excise tax. As a result, when gas prices go up, these states will receive additional tax revenue.
Take Indiana, which levies a 7% sales tax on gasoline in addition to its excise tax. Because gas prices are higher relative to a year ago, the state is currently collecting an additional 5 cents for every gallon of gasoline purchased. The Tax Foundation calculates that this amounts to more than $202 million in tax revenue for Indiana in just the past year, purely because of the increased price of gasoline.
The following table shows the nine states that charge a percentage-based tax on gasoline: