More On Tax Planningfrom The Advisor's Professional Library
- Charitable Giving Charitable giving can reduce your clients’ tax liabilities. However, the general and verification rules for the deduction of charitable gifts must be understood in order to take full tax advantage of such gifts.
- IRAs: In General Individual Retirement Accounts are highly popular tools for contributing funds that grow on a tax deferred basis. Depending on the type of IRA, the accumulation can be tax free.
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: