The federal fuel tax began in 1932 as a way to ease the deficit during the Great Depression, and the first tax was 1 cent per gallon at a time when gas averaged 10 cents a gallon, according to Forbes. The tax raised millions of dollars for the federal government, so Congress raised the levy to 1.5 cents a gallon in 1933. Congress has steadily increased the tax to 18.4 cents a gallon, which is the rate as of 2016.Continue Reading
Congress used several of the tax hikes to pay for wartime expenses and federal highway construction, notes Kiplinger. Although Congress lowered the rate to its original 1 cent per gallon in 1934, legislators increased the tax to 1.5 cents a gallon in 1940 as the possibility of American involvement in World War II loomed. Congress raised the rate to 2 cents a gallon in 1951 to help finance the Korean War.
In 1956, Congress raised the rate to 3 cents a gallon and promised to spend the entire tax collection on federal highways, adds Kiplinger. Congress raised the tax to 4 cents a gallon in 1959, and the rate remained stable until 1983, when Congress raised the levy to 9 cents a gallon and promised to spend 1 cent of every collection on mass transit. Congress raised the rate to 14 cents a gallon in 1990 and split the increase between highway construction and deficit reduction. The rate hit 18.4 cents a gallon in 1993, when Congress agreed to spend most of the increase on deficit reduction.Learn more about Taxes