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What is the history of federal fuel tax?

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Quick Answer

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.

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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.

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