Tennessee’s transportation system is supported by federal, state, and local funding. Federal and state highway user taxes and fees are the primary source of revenue for the construction and maintenance of highways in Tennessee. Fuel taxes are the largest source of federal and state revenue for highways followed by state vehicle registration and licensing fees. General fund revenues from taxes that are not dedicated to highways make up a large portion of funds used by local governments for highways and have been a source of federal highway funds since 2008.
Although Tennessee is one of four states with no transportation debt and its roads are generally rated as being of good quality, the state’s continued reliance on fixed-rate fuel taxes to provide transportation funding is likely not sustainable given a number of trends, including improved vehicle fuel efficiency, increased use of alternative fuel vehicles, and a decrease in driving per capita. State fuel tax collections have remained relatively flat since 2000. Tennessee last increased the gasoline tax in 1989 and the diesel tax in 1990. The purchasing power of Tennessee’s 20 cents per gallon gas tax in 2013 was equivalent to 11 cents in 1989.
Tennessee has fixed per gallon excise taxes on fuel for motor vehicles using public roadways. Tennessee’s gasoline tax is 20 cents per gallon and has been set at that rate since 1989. The tax on diesel fuel is 17 cents per gallon, which was last set in 1990. Tennessee highway users also pay a special petroleum tax of 1.4 cents per gallon, which includes an environmental assurance fee of 0.4 cents per gallon earmarked for the Petroleum Underground Storage Tank Fund. Tennessee drivers are also paying a Federal tax per gallon of gas is 18.4 cents.
Tennessee’s gas tax rate is 13th lowest among the 50 states; its diesel fuel tax rate is 7th lowest. At 21.40 cents per gallon (cpg), Tennessee’s gas tax rate is 9.82 cpg less than the U.S. average of 31.22. At 18.40 cpg, Tennessee’s diesel tax rate is 12.62 cpg less than the U.S. average of 31.02. Among
states surrounding Tennessee, Tennessee’s total gas tax rate is 2.35 cpg less than the average, and
Tennessee’s diesel rate is 6.22 cpg less than the average. Four of Tennessee’s eight surrounding
states have higher gas tax rates than Tennessee and four have lower. Six of the surrounding states
have higher diesel fuel tax rates than Tennessee and two have lower. Below you can see what the average Tennessee driver pays in gas tax each year. While this chart shows a conservative 20 miles per gallon, a typical family in Williamson County driving a Suburban which comes in at 15 mpg would end up paying $100 more than the average below for a total of $398.
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