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Gasoline tax
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Gasoline tax

A Gasoline Tax (or gas tax or fuel tax) is a tax imposed on the sale of gasoline. Often (e.g. in the United States) the funds are dedicated or hypothecated to transportation, or even roads, so that the gas tax is considered by many a user fee. In other countries, the gas tax is considered a source of general revenue and is not designated for roads. The demand for the automobile is relatively inelastic, a one percent increase in the price of gas will reduce demand by much less than one percent.

While state gas taxes had been around for more than a decade, the first federal gas tax in the United States was created on June 6, 1932 with the enactment of the Revenue Act of 1932 (1 cent per gallon sold). The U.S. federal gasoline tax in 2003 was 18.4 cents a gallon, and the gasoline taxes in the various states range from 10 cents to 30 cents, averaging about 22 cents.

In most countries the gasoline tax is not imposed on fuel which is not intended for transportation such as fuel used to power agricultural vehicles and home heating oil which is identical to diesel. This creates an economic incentive to illegally use fuel not intended for transportation.

In the People's Republic of China, the fuel tax has been a very contentious issue. Efforts by the State Council and the Communist Party of China to institute a fuel tax in order to finance the National Trunk Highway System have run into strong opposition from the National People's Congress, largely out of concern for its impact on farmers. This has been one of the uncommon instances in which the legislature has asserted its authority.

See also