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December 2013 Policy Study, Number 13-10

   

Fuel Tax:  What Is a Fair System for Iowa?

   

How Does Iowa Compare with Neighboring States

   

 

The following table compares all of Iowa’s neighboring states for their gasoline tax. As you can see from the table currently Iowa ranks 33rd out of the 50 states, with only Missouri having a cheaper fuel tax than us. So currently there is an incentive to drive across the border and into Iowa to purchase gas from the other states surrounding Iowa. The same is true with travelers driving through Iowa; they would know that our fuel tax is cheaper than Illinois, Minnesota, or Nebraska, which would lead them to purchase gas in Iowa over those other states.

 

Table 2 - State Gasoline Tax Rates as of January 1, 2013 (Cents Per Gallon)

State

Excise Tax

Other Taxes and Fees

Total

Rank

Iowa

21.0

1.0

22.0

33

Illinois

19.0

20.1

39.1

5

Missouri

17.0

0.3

17.3

45

Minnesota

28.5

0.1

28.6

19

Wisconsin

30.9

2.0

32.9

14

South Dakota

22.0

2.0

24.0

28

Nebraska

24.6

0.9

25.5

24

Source: Tax Foundation, <http://taxfoundation.org/article/state-gasoline-tax-rates-2009-2013> accessed on Oct. 29, 2013.

 

Living in Iowa and close to the Missouri border we all know that gas is cheaper in Missouri due to their fuel tax being lower, so if you are traveling south everyone knows to wait until you are in Missouri to fill up with gas at the lower tax rate. But Governor Candidate Jack Hatch has proposed raising the fuel tax by 2 cents per year for the next five years for a total increase of 10 cents.[25] This increase in the fuel tax will move Iowa from the rank of 33rd to the rank of 16th based on the data collected by Tax Foundation. This would mean that almost all states surrounding Iowa would have lower fuel taxes except for Wisconsin and Illinois.

 

Illinois, Nebraska, and Minnesota have increased their fuel tax within the last few years. Illinois also charges sales tax on top of the federal and state taxes paid for gas purchases, which means in Illinois you pay almost 80 cents in taxes per gallon of gas.[26] These increases have led to those states having higher fuel taxes than Iowa.[27] Wisconsin, South Dakota, and Missouri have discussed increasing their fuel tax, but have not acted on it.

 

   

 

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