1The Gas TaxImpacts and AlternativesBy: Christine Royce, Dan Leatham, Nune Khachaturyan, and Ryan ChamplinOverviewBackground of the first fuel run carEnergy Tax Policy: How tax was implemented on oil History of Gas TaxU.S. Dependence on Foreign OilEffects of Oil in other CountriesEnergy Efficiency What we can do to conserve energyHistory of the Car1880’s: The first fuel run vehicle was built in Germany by Carl Benz that developed a car with four-stroke gas engine. Early 1900s: Cadillac and Ford1908: General Motors 1925: Chrysler History of the Car200,000,000+200040,000,000195025,600,000 (WWII)194430,000,000194120,700,000 (Depression)193323,000,00019308,0001900U.S. Car RegistrationsYearFacts About Transportation Americans drove about 2.9 trillion miles in 2003Today, U.S. has more registered vehicles than licensed drivers. How does this effect gasoline tax and gasoline prices? Facts About TransportationIn the U.S., transportation accounts for 2/3 of all our oil use.U.S. uses 300 gallons of gasoline per person per year. 1980 one in every 20 consumer dollars was spent on gasoline and there was one in 30 in 20052Power of Car Industries Pressure on IndustryBetter fuel efficiency vehiclesHybrid or smaller fuel efficient carsConsumer demand Bigger Vehicles Make sense The U.S. is automobile dependant Energy Tax Policy Involves the use of the government’s main fiscal instruments – taxes and tax subsidies –to alter the allocation or configuration of energy resources. Intended to either correct a problem or distortion in the energy markets or to achieve some social, economic, environmental, or fiscal objective. Energy Tax Policy 1918-1970Federal energy tax policy was focused on increasing domestic oil and gas reserves and production. Two oil/gas tax code preferences:Expensing of intangible drilling costs (IDCs) and dry hole costsThe percentage depletion allowance Energy Tax Policy 1918-1970Subsidies for producers Write off’s for bringing a well into productionClaim 27.5% of revenue as a deduction Reduction in marginal tax rates in oil and gas industries.Led to more profitable productionLower prices encouraged petroleum consumptionEnergy Tax Policy 1970sAn increased awareness of environmental pollution caused large revenue losses.Subsidies and depletion were hard to justify.Two Energy CrisesOil Embargo of 1973Iranian Revolution 1978-1979Shift from oil and gas supply toward energy conservation.3Energy Tax Policy 1970-1980Energy Tax Act of 1978“Gas Guzzler” excise taxNumerous tax incentives or subsides for energy conservation. Windfall Profit Tax 1980Comprehensive Environmental Response, Compensation, and Liability Act of 1980Energy Tax Policy 1980sReagan Administration – Free MarketHigh gas prices would encourage alternative energy resources. 1981 National Energy Policy Plan – culminated in a 1984 Treasury study on general tax reform.1986 Tax Reform ActIncentives for oil an gas were pared back. Energy Tax Policy 1990-RecentRevenue Provisions of the Omnibus Reconciliation Act of 1990Low crude oil prices were introduced 1999 106thCongress focusing on tax bills and rising crude oil prices. 2000 proposal to reduce or eliminate the tax on gasoline due to higher oil prices. Energy Tax Policy 2005190thCongress moved to rescind oil and gas incentives and even to raise energy taxes on oil and gas, in response to the high energy prices and record oil and gas industry profits. Reconciliation Bill 2020:Raised taxes on major U.S. integrated oil companies. 2006: Negligible tax increase on major integrated oil companies amortized over five years.History of the Gas Tax 1932- Congress first enacted an excise tax on gasoline, until 1956 the proceeds of the gas tax went into general revenues, although the amount raised each year was used as an informal benchmark for Federal highway spending. The Federal-Aid Highway Act of 1956 established the Highway Trust Fund and stipulated that 100% of the gas tax be deposited into the fund. From 1956 to 1982, the Highway Trust Fund was used solely to finance expenditures from the federal highway program. History Continued… Highway Trust Fund revenues were first allocated to mass transit in the Surface Transportation Act of 1982, when Congress raised the gas tax from four cents per gallon to nine cents per gallon and dedicated one cent, or 20 percent, of the increase to the newly-established Mass Transit Account. Each time there has been an increase in the amount of gas tax going into the Highway Trust Fund—1990, 1993 and 1997—20 percent of the increase has been allocated to the Transit Account and 80 percent to the Highway Account. Of the current gasoline tax of 18.3 cents per gallon, 2.86 cents per gallon is allocated to the Mass Transit Account. (Through 1997)40.5%15.5%83.9%Oct. 1,199710.9%65.6%23.5%Jan. 1,19960.5%10.9%65.2%23.4%Oct. 1,19950.5%8.2%54.3%37.0%Oct. 1,19930.7%10.6%70.1%17.7%Dec 1,199011.1%88.9%Apr. 1,1983100.0%Before1983Other TrustFundsMass TransitAccountHighwaysGeneralRevenuesDatePercent DistributionPercent Distribution of Gasoline Tax Revenues Since 1983Percent Distribution of Highway Trust Fund Revenues Since 19830.5%15.5%83.9%Oct. 1,199714.3%85.7%Jan. 1,19960.7%14.2%85.1%Oct. 1,19950.9%12.9%86.2%Dec 1,199011.1%88.9%Apr. 1,1983100.0%Before1983Other TrustFundsMass TransitAccountHighwaysDatePercent DistributionCurrent Gasoline Gas TaxesNationwideThe nation wide average tax on gasoline is 46.9 cents per gallon as of July 2007, up 1.1 cents from March 2007. The federal tax on gasoline is 18.4 cents per gallon. The average state gasoline excise tax remained consistent at 18.2 cents per gallon. Other taxes add 10.2 cents per gallon to the average tax on gasoline. These other taxes include applicable sales taxes, gross receipt taxes, oil inspection fees, underground storage tank fees and other miscellaneous environmental fees. Adding these taxes and fees to the state excise taxes results in a volume-weighted average state tax of 28.5 cents per gallon.Current Gas TaxesExcise: an internal tax or duty on certain commodities, as liquor or tobacco, levied on their manufacture, sale, or consumption within the country.Source. dictionary.comCurrent Gas TaxesRegionallyRegionally, motorists in Western states pay the most in gasoline taxes, an