By 2034, the gas tax and other car-related excise taxes are projected to raise less than half of the Highway Trust Fund’s outlays. While broader tax and spending reforms are necessary for overall deficit reduction, improving transportation funding would be a crucial step forward.
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Though gas taxes are intended to serve as user fees and pollution deterrents, they vary widely across states. How does your state’s burden compare?
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Gas tax revenues have decoupled from road expenses and have been unable to support road funding in recent years. As such, states nationwide are exploring ways to supplement or replace gas tax revenues.
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Buckle up as we navigate the twists and turns of infrastructure and road funding. As electric vehicles gain traction, traditional gas taxes are running out of fuel to support our infrastructure budget.
At the most recent Republican primary debate, former governor and United Nations ambassador Nikki Haley (R-SC) proposed eliminating the federal gas tax to lower fuel prices for consumers.
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The state EV taxation landscape reflects the evolving transportation sector and the pressing need to address both fiscal gaps in road funding and environmental concerns.
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California pumps out the highest state gas tax rate of 77.9 cents per gallon (cpg), followed by Illinois (66.5 cpg) and Pennsylvania (62.2 cpg).
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As lawmakers explore funding mechanisms for additional federal infrastructure investment, they should focus on permanent, sustainable, and transparent revenue options that conform to the benefit principle. Permanent user fees, appropriately adjusted to restore and maintain their purchasing power, would serve as ideal revenue sources for federal infrastructure investments.
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As spending priorities are dividing lawmakers trying to negotiate among the various federal infrastructure plans, less time is being spent on the funding of one of the key components—our highways, both current and future taxes and fees. One of the current taxes, a federal excise tax on heavy commercial vehicles and trailers, is an important revenue generator, but its flawed tax design has a negative impact on investment and leads to unstable revenue.
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Traditionally, revenue dedicated to infrastructure spending has been raised through taxes on motor fuel, license fees, and tolls, but revenue from motor fuel has proven less effective over the last few decades.
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In Pennsylvania, Gov. Tom Wolf (D) has proposed phasing out the gas tax as the main funding mechanism for the state’s highway fund, and he has established a commission to recommend options for replacing it with alternative revenue sources. In a statement, the governor called the current motor fuel tax burdensome, outdated, and unreliable.
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What can the U.S. do to raise the revenue needed for infrastructure upkeep and accurately internalize the costs associated with road usage?
The highway trust fund is on track to run out of money by 2021, states are struggling to cover their transportation spending, and increased fuel economy, plus inflation, is chipping away at gas tax revenue year. How can Congress and state governments ensure they have the revenue necessary to fund our highways? One solution is the vehicle miles traveled (VMT) tax.
35 min read