When a Six-Cent Tax Was a Nickel Too Much (1938)

JF Ptak Science Books    Post 2514

Although the artist/author created some great and 30's-bubbly cartoons, I'm not sure about what he was so grouchy about--plus I don't know about his number sources, either. The main graphic that gets to his point shows that in 1920 $1 bought 3.5 gallons of gas and paid  6 cents in taxes; in 1938 that dollar bought 6 gallons but the taxes were 36 cents.  So the screed was about getting even more gasoline for the buck even though it was buying nearly twice as much anyway.  Since the federal excise tax in gasoline actually went down from 1.5 cents to 1 cent a gallon at this time, the additional taxes would have come from the states, which I guess were not part of the equation in 1920. But the extra nickel or so per gallon looks to be about average for state taxes on gas in 1938 (as we see in Notes #1 below).

[The image at left is the rear cover of the pamphlet under discussion--it really doesn't have a title, just a series of statements.]

This was sort of a long way to go in looking at a cartoon-illustrated sweaty tax screed from 1938, but as it turns out  there was a little surprise in the results.  The author/artist is uncredited but the pamphlet was produced and published by the American Petroleum Industries Committee, which no doubt was lobby for a decrease in state (and federal?) taxes to lower the price of gasoline and perhaps to increase consumption.  They made it abundantly clear that they did not like taxes.  And as it turns out they really don't identify the source of the taxes, just gas taxes in general, though they made it seem as though it was a unified approach to lowering federal and state taxes together as a unit, and not as 48 individual governing bodies for state taxes. On the one hand the penny tax wasn't really so bad; ont he other the state taxes could be 4-5-6 cents, which turns out to be a lot more than states charge today (CPI adjusted). 

So, given for example 5,000 miles/year at 15mpg¹ average for 1938 is 333 gallons at 10 cents gallon making $33.33/year in gas expenses or 1.9% of a yearly average salary of $1,731. 

In 2015, 5,000 miles/year at 20mpg=250 gals x $3.20 = $800/year in gas, and with the average salary (according to the Bureau of Labor Statistics) of $850/week or $43,700/year, the gas expense would be 1.8%  of the yearly income. I have seen other figures stating the individual average salary to be about $30,000--the discrepancy is considerable and I'm not sure of the origin. Using the lower figure the gas expenses jump to about 2.6%.  

In any event I found it odd that working with a few found and not-quite arbitrary stats that the average percentage of the cost of gasoline via yearly salary would be so very similar.  Of course the cars have gotten much more expensive and also far more powerful and safer to operate, and car insurance has no doubt increased, as has maintenance, so the overall cost of keeping and using a car is quite a lot more today than in 1938--still the similarity of gas/yearly income was pretty cool to see.  

Now the taxes that these guys were complaining about: that 1 cent in 1938 (according to the BLS inflation calculator) is equal to about 17 cents in 2015 dollars, which is just about what the federal excise tax is today in 2015. The 5 cent state tax in 1938 winds up being quite a bit more than state taxes today--for example North Carolina was charging 6 cents ($1.01) in 1938 compared to its 38 cents today.  

And so where does this leave us? I really don't know, except that when there are general complaints about things costing too much it is interesting to see how expensive things really are in a longitudinal perspective.  That, and always consider the source.  

 

Notes: 

1.   First of all the 5k/yr average driving is arbitrary. Secondly I've found the stat several times now in quick searches that Ford Model A cars got about 20mpg in 1928.  Cars got heavier/more powerful by 1938 and for the sake of this exercise assume that the average mileage decreased with the increase in power and weight.  It is a little bit of a long shot but probably not to far from the mark. 

 

IRS stats for federal excise taxes on gasoline, http://www.irs.gov/pub/irs-soi/00gastax.pdf