California has the highest tax rate on gasoline in the United States. As of July 2023, the gas tax in California amounted to 77.9 U.S. cents per gallon. California has long been known as the state with the highest tax rates – and consequently some of the highest fuel prices in the country. In January 2024, it ranked just below Hawaii as the U.S. state with the highest gasoline retail price.
Gas price components
Out of all components making up retail gasoline prices, federal and state taxes are one of the strongest determinants for how much consumers pay for gas. These taxes are generally invested back into the construction and repair of road infrastructure. The federal government also places a tax on gasoline sold in the country, but almost every gas tax imposed by the states themselves is higher than this federal rate. Higher gasoline taxes may also affect driving habits, as those who live in states with higher gas taxes tend to drive less when other options are available.
U.S. motor fuel tax revenue
State taxes on fuel were first introduced in Oregon in 1919 while the rest of the states followed suit within the next decade. The amount generated through such taxes increased significantly throughout the last 40 years, with annual U.S. state and local motor fuel tax revenue climbing to over 53 billion U.S. dollars.
