Why is Alaska's gas tax so low?

Alaska funds its government largely from oil revenue, so it has never needed to lean on fuel taxes for road money. The 8.95-cent rate is a simple flat excise with minimal extra fees.

Why is gas expensive in Alaska if the tax is so low?

Distribution costs. There are no interstate pipelines into Alaska, so fuel arrives by ship or barge, which adds logistics costs that dwarf the tax. Taxes are only one slice of pump prices.

What is the lowest gas tax in the continental US?

Among the contiguous states, New Mexico at 18.9 cents is effectively the lowest flat state rate, with Arizona at 19 cents and Oklahoma near 19 cents. Hawaii at 18.5 cents is lower but not continental.

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Which State Has the Lowest Gas Tax in 2026?

Q: Which state has the lowest gas tax in 2026?

Alaska, at 8.95 cents per gallon, a rate that has barely moved in decades. Hawaii is next at 18.5 cents, followed by New Mexico at 18.9 cents.

Alaska, and it is not close. In 2026 Alaska charges 8.95 cents per gallon in state gas tax, less than one-eighth of California's 73.6 cents. That is the bottom of the Tax Foundation's 2026 ranking, and it has been the bottom for a very long time. But the bottom of the chart has its own stories: why these rates never move, why cheap tax does not mean cheap gas, and what the states at the bottom have in common.

The bottom 5 in 2026

Alaska: 8.95 cents. Hawaii: 18.5 cents at the state level, though county taxes can add up to 24 cents more. New Mexico: 18.9 cents. Arizona: 19.0 cents. Oklahoma: about 19 cents. Then Louisiana and Texas at 20 cents each, with Texas holding its 20-cent rate since 1991, which means the real value of that tax has been cut in half by inflation since the last time the legislature touched it.

Contrast that with the top of the chart I ranked last week: California at 73.6, Illinois at 70.4, Indiana at 63.1. The spread between the top and bottom, roughly 65 cents a gallon, is worth about $9.75 in state tax on a 15-gallon fill-up. That is real money every week if you drive for a living.

Why Alaska's rate never moves

Alaska funds its government mostly from oil revenue, not from its drivers. When your state budget floats on crude prices, an 8.95-cent gas tax is a rounding error, and no legislature is going to spend political capital raising a tax that brings in almost nothing. The rate has sat nearly untouched since 1970. It is the fiscal equivalent of leaving a jar of pennies on the shelf for fifty years.

The southern tier of the bottom 5 is different. Texas, Oklahoma, Louisiana, and New Mexico are all oil-producing states too, but their story is political rather than fiscal. Texas compensates with constitutional amendments that redirect oil and gas severance tax revenue to the State Highway Fund, which works when energy prices are high and leaves gaps when they are not, as Texas learned in 2015, 2016, and 2020.

The Alaska paradox: lowest tax, expensive gas

Here is the part that breaks the simple story. Alaska has the lowest gas tax in the nation and some of the highest pump prices, consistently ranking in the top five for what drivers actually pay. The reason is distribution, not tax. There are no interstate pipelines into Alaska. Fuel arrives by ship or barge to most communities, and the logistics costs dwarf the tax savings. Hawaii has the same problem: an 18.5-cent state rate paired with expensive gas, because everything arrives by tanker.

This is the distinction I keep coming back to: the gas tax explains more of the difference between two states than most people assume, but it is never the whole story. Refining capacity, fuel blends, and transport costs fill the gaps. The 8.95-cent rate in Alaska buys Alaskans nothing at the pump, and Californians would trade their 73.6 cents for Anchorage logistics costs in about a second.

What low-tax states have in common

Look at the bottom of the chart and the pattern is clear: flat excise taxes, no sales tax applied to fuel, and no automatic inflation adjustment. That stability is the attraction and the problem. A fixed rate that seemed reasonable in 2005 buys considerably less road repair in 2026. States that have not updated their gas tax in decades face a widening gap between what their roads need and what the tax generates, and the gap grows every year because inflation does not ask permission.

My take: low-tax states are not necessarily better-managed states. They are usually states that found another way to pay for roads, or states that are quietly deferring maintenance and letting the bill come due later. If you are deciding where the cheapest fill-up is on a road trip, check the full 2026 ranking. If you want to know what you pay over a full year, the formula is here: How Much Gas Tax Do You Pay Per Year?

See every state ranked: use our free 2026 gas tax by state table with annual cost estimator and CSV download.

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